Question

Operating expenses are best budgeted on the basis of knowledge about:

A. cost behavior patterns.
B. relevant range.
C. prior period actual expenses.
D. current period budget amounts.

Answer 1

Operating expenses are best budgeted on the basis of knowledge about cost behavior patterns and the relevant range.

Step-by-step explanation:

Operating expenses are best budgeted on the basis of knowledge about cost behavior patterns. Understanding how costs behave is crucial for accurately budgeting for operating expenses.

For example, some costs may remain fixed regardless of the level of activity, while others may vary with changes in activity. By knowing the cost behavior patterns, budgeting can be done more effectively.

Knowledge about relevant range is also important in budgeting operating expenses. The relevant range refers to the range of activity in which the organization operates. Different costs may behave differently within this range, so understanding the relevant range helps in accurately budgeting for operating expenses.