ECONOMICS

Detailed explanation-1: -Answer and Explanation: The correct answer is *a) Consists of estimates of costs and expenses for various possible levels of activity. Flexible budgets are accounting tools that calculate different expenditure levels for variable costs, depending upon changes in actual revenue.

Detailed explanation-2: -A flexible budget adjusts based on changes in actual revenue or other activities. The result is a budget that is fairly closely aligned with actual results. This approach varies from the more common static budget, which contains nothing but fixed expense amounts that do not vary with actual revenue levels.

Detailed explanation-3: -A flexible budget is a budget that adjusts to a company’s activity or volume levels. Unlike a static budget, which doesn’t change from the amounts established when the company creates the budget, a flexible budget continuously changes with a business’ cost variations.

Detailed explanation-4: -To calculate a flexible budget, first multiply the variable cost by the actual units produced. For example, if you produced 100 units at a unit cost of $5, the budget might be $5, 000. A flexible budget accounts for a larger number of units produced, so you might expect to sell up to 150 units.