Question

The primary difference between a static budget and a flexible budget is that a static budget a.is concerned only with future acquisitions of fixed assets, whereas a flexible budget is concerned with expenses that vary with sales b.includes only fixed costs, whereas a flexible budget includes only variable costs c.is a plan for a single level of activity, whereas a flexible budget adjusts for changes in the activity level d.is suitable in a volatile demand situation while a flexible budget is suitable in a stable demand situation

Answer 1

Answer:

The correct answer is letter "C": is a plan for a single level of activity, whereas a flexible budget adjusts for changes in the activity level.

Explanation:

Budget variance can be measured by using a static budget or a flexible budget. Both measures must be done at the end of an accounting period. A static budget is forecasted at the end of a year and reflects the changes in costs -mainly raw materials- of the operations of business throughout the period. They are prepared for one level of production volume only and do not change after developed.

Flexible budgets are estimated by the beginning of the period by can change during the year according to the production level. They are estimated for different levels of volume and separate fixed and variable costs.