Explain your understanding of activity flexible budgeting in terms of the relationship between changes in activity costs and changes in activity drivers.

Assignment 2

a. Explain your understanding of activity flexible budgeting in terms of the relationship between changes in activity costs and changes in activity drivers.

b. Discuss how activity flexible budgeting helps managers plan and monitor activity improvements.

c. Below is the information on four overhead activities for AlKauthar Ltd.:

Fixed   Cost

Variable   Rate

Machine   hours

Machine   hours

Setting   up

Purchase   orders

i. Prepare an activity-based flexible budget for the following production levels:

32,000   units

64,000   units

Machine   hours

Setups

Purchase   orders

ii.As an accountant, how would you utilize the above information in meeting your responsibility for budgeting and controlling costs?

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