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Is it best to choose an activity measured in dollars when choosing an acitivy measure for flexible budgets?
Updated: 9/17/2023
The activity base should not be expressed in dollars or other currency. For example, direct labor cost is usually a poor choice for an activity base in flexible budgets. Changes in wage rates affect the activity base but do not usually result in a proportionate change in overhead. Therefore, it is normally best to use physical, rather than financial, measures of activity in flexible budgets..
Answer - NO
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