An understanding of cost behavior is useful to managers for: A. Absorption costing B. Flexible budgeting C. External reporting D. Inventory costing and income determination

The correct answer is letter "B": Flexible budgeting.

Explanation:

Cost behavior helps managers to implement different budgeting strategies to maximize revenues. During the operations of a company, costs may vary. However, a company must drive all its efforts to keep its initial strategic plan unchanged keeping its profits goals.

For such a purpose, top executives must know how to handle flexible budgets to shorten certain operations or increase productivity in front of raising costs scenarios or managing a level of surplus (if the costs drop) that does not affect the entity but could offset future shortages.

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