In a flexible budget, fixed costs are expressed as a constant amount in total.

In a flexible budget, fixed costs are expressed as a constant amount in total.

• A. They Sometimes Change With Activity Levels
• B. They Remain Constant In Total Across Activity Levels
• C. They Increase As Volume Increases
• D. They Vary Unpredictably

Answer: (B)

In a flexible budget, the key idea is that cost behavior adapts to the actual level of activity. Fixed costs are not tied to how much you produce or sell within the relevant range, so their total amount remains unchanged as activity changes. You can think of fixed costs as a base amount that doesn’t rise or fall with output, even though the cost per unit may do so because the same total is spread over more or fewer units. That’s why the statement that fixed costs stay constant in total across different activity levels is the best description. If something else happened to fixed costs, it would be outside the normal assumption of fixed-cost behavior within the relevant range.

In a flexible budget, the key idea is that cost behavior adapts to the actual level of activity. Fixed costs are not tied to how much you produce or sell within the relevant range, so their total amount remains unchanged as activity changes. You can think of fixed costs as a base amount that doesn’t rise or fall with output, even though the cost per unit may do so because the same total is spread over more or fewer units.

That’s why the statement that fixed costs stay constant in total across different activity levels is the best description. If something else happened to fixed costs, it would be outside the normal assumption of fixed-cost behavior within the relevant range.