Question

Select the choice that best describes the steps in developing a flexible budget. A. 1. Identify the standard quantity of output. 2. Calculate the flexible budget for revenues based on budgeted selling price and standard quantity of output.3. Calculate the flexible budget for costs based on budgeted variable cost per​ output, standard quantity of​ output, and budgeted fixed costs. B. 1. Identify the actual price per output. 2. Calculate the flexible budget for revenues based on budgeted quantity of output and actual selling price. 3. Calculate the flexible budget for costs based on budgeted quantity of​ output, actual cost per​ output, and actual fixed costs. C. 1. Identify the actual quantity of output. 2. Calculate the flexible budget for revenues based on budgeted selling price and actual quantity of output. 3. Calculate the flexible budget for costs based on budgeted variable cost per​ output, actual quantity of​ output, and actual fixed costs.

Answer 1

Answer:

C. 1. Identify the actual quantity of output. 2. Calculate the flexible budget for revenues based on budgeted selling price and actual quantity of output. 3. Calculate the flexible budget for costs based on budgeted variable cost per​ output, actual quantity of​ output, and actual fixed costs.

Explanation:

1. Any budget starts by determining our current output level.
2. To calculate the sales budget we must estimate our total revenue using our current output level and the estimated selling price for the next period. If we are certain that our output level will increase or decrease significantly over the next period, we can use the estimated output level instead of the current output level.
3. To calculate the costs budget we must estimate the variable costs per unit times the current output level (variable costs budget) and then we add the estimated fixed costs, which are not necessarily our current fixed costs.