Chapter 9

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Prepare a flexible budget and a flexible budget performance report

Planning budget: Prepared before the period begins and is valid for only the planned level of activity

Flexible budget: An estimate of what revenues and costs should have been, given the actual level of activity for the period

Use the cost formula for each cost to figure out the actual level of activity

Rent, liability insurance, and employee health insurance are not affected by the cost formula

Calculate and interpret activity variances