What question did this study set out to answer?

This article aims to explore the relationships between flexible budgeting and different cost structures in an activity-based costing framework.

June 15, 2026

Flexible Budgeting in an Activity-Based Costing Framework.

Key Points

This article aims to explore the relationships between flexible budgeting and different cost structures in an activity-based costing framework.
Analyzes resource allocation and costs in activity-based costing practices.
Discusses the behavior of costs as variable or fixed, and their implications for resource management.
Evaluates the relevance of committed and flexible resources in response to demand changes.
Identifies that some resources are supplied as needed, eliminating unused capacity.
Clarifies that costs can be a mix of committed and flexible based on usage demands.
Highlights the importance of understanding cost behavior for effective budgeting in businesses.

Abstract

Abstract This article focuses on flexible budgeting in an activity-based costing (ABC) framework. The researchers indicated that some resources, such as energy to operate machines or overtime labor, are supplied only as needed so that no unused capacity can exist for these resources. The costs of supplying such resources are what many people have characterized as "variable costs" since the spending on these resources varies directly with the demands or usage for the resources. The assumption that the costs of resources to perform an activity are either entirely "variable" or "fixed," or flexible or committed, as they will be referred to in the remainder of this paper, is not an inherent feature of activity-based cost systems. In such cases, the activity cost exhibits a mixed behavior, with the total cost of performing the activity representing a combination of committed and flexible supply of resources in response to demand fluctuations.

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