The primary difference between a static budget and a flexible budget is that a static budget
A) is suitable in volatile demand situation while flexible budget is suitable in a stable demand situation.
B) is concerned only with future acquisitions of fixed assets, whereas a flexible budget is concerned with expenses that vary with sales.
C) includes only fixed costs, whereas a flexible budget includes only variable costs.
D) is a plan for a single level of production, whereas a flexible budget can be converted to any level of production.

Question

Quizplus · Accepted Answer

The primary difference between a static budget and a flexible budget is that a static budget is a plan for a single level of production, whereas a flexible budget can be converted to any level of production. Static budgets are prepared for fixed levels of output, while flexible budgets are used to adjust to changes in operations and production levels. A flexible budget includes both fixed and variable costs, allowing management to adjust spending based on changing conditions.

The Primary Difference Between a Static Budget and a Flexible