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What is the primary difference between a static budget and a flexible budget?
A) The static budget contains only fixed costs while the flexible budget contains only variable costs.
B) The static budget is prepared for a single level of activity while a flexible budget is adjusted for different activity levels.
C) The static budget is constructed using input from only upper level management while a flexible budget obtains input from all levels of management.
D) The static budget is prepared only for units produced while a flexible budget reflects the number of units sold.
Static Budget
A fixed budget that does not change or adapt to variations in business activity levels throughout the fiscal year.
Flexible Budget
A budget that adjusts or flexes with changes in volume or activity levels, enabling more accurate budgeting in variable cost categories.
Single Level
Referring to a structure or system that operates or is organized at one layer or stage without any subdivisions or hierarchical levels.
- Attain insight into the essence of flexible budgeting and its capacity to accommodate varying degrees of operational activities.
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Learning Objectives
- Attain insight into the essence of flexible budgeting and its capacity to accommodate varying degrees of operational activities.
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