A flexible budget is one where:
A) fixed costs are not included.
B) the budget estimates are prepared for a range of activities.
C) the estimates are amended if they are not attained in the period.
D) preparation may be postponed if the entity is very busy or is short staffed.

Question

Quizplus · Accepted Answer

A flexible budget is designed to accommodate a range of possible activity levels and adjusts accordingly. This allows for a more accurate analysis of performance by providing budgeted expenditure levels for a range of possible activity levels. Therefore, option B is the correct answer. Option A is incorrect because even though a flexible budget may not include some fixed costs, it is not a defining characteristic. Option C is incorrect as adjusting the budget to attain it is not necessary for a flexible budget but a good practice for any budget. Option D is incorrect because any budget should be prepared regardless of external factors.

A Flexible Budget Is One Where