Abstract The article focuses on the role of flexible budgeting and variance analysis in the context of activity-based costing (ABC). In their article published in a 1994 issue of the journal "Accounting Horizon," researchers R. Cooper and R.S. Kaplan has considered only activities where resources are fixed in the short-term and argued that flexible budgeting and variance analysis will have a limited role for managing the costs of these activities. Two research papers in the June 1994 issue of the journal considered activities with both short-term fixed and short term variable components but arrived at what appear to be different approaches to flexible budgeting and variance analysis. Researchers Y.T. Mak and M.L. Roush in their research paper published in the June1994 issue of this journal adapted conventional flexible budgeting and variance analysis to the ABC context and proposed the computation of price and efficiency variances for variable activity costs, and budget and capacity variances for fixed activity.
Mak et al. (Sun,) studied this question.