alleryStart learning →What does a flexible budget provide that a static budget does not?
AActual costs measured after the period ends
BA split of costs between departments
CA forecast of cash receipts by month
DBudgeted amounts at several quantity levels
Answer & Solution
Correct answer: D. Budgeted amounts at several quantity levels
1. The weakness of a static budget is that it is fixed at one activity level.
2. A flexible budget answers that by showing budgeted amounts at various quantity levels.
3. Managers can then compare actual costs against the level of activity that actually happened.
4. A flexible budget is in effect a menu of static budgets to select from once actual units are known.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 7.3 Flexible Budget_
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