Which one of the following statements is true concerning a flexible budget?
A)It is prepared once the actual activity level is determined.
B)It is relevant both within and outside the relevant range.
C)It replaces a master budget.
D)It is one of the financial budgets.

Question

Quizplus · Accepted Answer

A flexible budget is prepared after the actual activity level is determined, in order to compare actual costs with what the costs should have been at that level of activity. Option B is incorrect because a flexible budget is only relevant within the relevant range, which is the range of activity levels that the company expects to operate in. Option C is incorrect because a flexible budget is not a replacement for a master budget; rather, it is a tool used in conjunction with the master budget. Option D is incorrect because a flexible budget is not one of the financial budgets; rather, it is a tool used to help analyze actual results against the budget.

Which One of the Following Statements Is True Concerning a Flexible