Flexible budgets are used by managers to help set predetermined overhead rates by

• allowing managers to understand what manu¬ facturing overhead costs are incurred and what the behaviors (variable, fixed, or mixed) of those costs are.

• allowing managers to separate mixed costs into their variable and fixed elements.

• providing infonnation on the budgeted costs to be incurred at various levels of activitiy.

• providing a visualization of the impacts on the predetermined fixed overhead rate (or on a plantwide rate) from changing the denominator level of activity.

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