Select the correct statement regarding flexible budgets.
A) A flexible budget can only be prepared for a single level of activity.
B) A flexible budget is not used for planning.
C) A flexible budget shows expected revenues and costs at a variety of activity levels.
D) A flexible budget is also known as the master budget.

Question

Quizplus · Accepted Answer

A flexible budget is designed to show revenues and costs at a variety of activity levels, allowing management to adjust their financial planning based on actual levels of activity. Option A is incorrect because flexible budgets are designed to account for multiple levels of activity. Option B is incorrect because flexible budgets are used for planning as well as for performance evaluation. Option D is incorrect because the master budget refers to the comprehensive financial plan for the entire organization, which includes both a static and flexible budget.

Select the Correct Statement Regarding Flexible Budgets