ECONOMICS

Detailed explanation-1: -The main difference between a flexible budget and a static budget is that the static budget is not adjusted for changes in the level of activity. Fixed costs should not be included in a flexible budget because they do not change when the level of activity changes.

Detailed explanation-2: -Static vs Flexible Budgets Static Budget-the budget is prepared for only one level of production volume. Also called a Master budget. Flexible Budget-a summarized budget that can easily be computed for several different production volume levels. Separates variable costs from fixed costs.

Detailed explanation-3: -A flexible budget is one that is allowed to adjust based on a change in the assumptions used to create the budget during management’s planning process. A static budget, on the other hand, remains the same even if there are significant changes from the assumptions made during planning.

Detailed explanation-4: -Answer: b. A flexible budget provides cost allowances for different levels of activity, whereas a static budget provides costs for one level of activity.