COST ACCOUNTING
FLEXIBLE BUDGETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A financial plan of estimated revenues and expenses based on the current actual amount of output
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It continuously “flexes” with a business’s variations in costs
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It does not change from the amounts established when the budget was created.
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This type of budget that adjusts to the activity or volume levels of a company.
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Detailed explanation-1: -It is not true that a flexible budget is not based on the same revenue and cost behavior assumptions as the master budget.
Detailed explanation-2: -The correct answer is d. It calculates total variable cost by multiplying actual units by budgeted variable cost per unit.
Detailed explanation-3: -Fixed Cost Component Because fixed costs do not vary during the period in question, fixed costs behave the same in a flexible budget as they do in a static, or fixed, budget.
Detailed explanation-4: -Answer and Explanation: The correct answer is a. Flexible budgets are based on different assumptions about cost behavior than those used for static budgets. Flexible budgets do not assume different cost behaviors than static budgets but rather they assume different levels of activity.
Detailed explanation-5: -In a flexible budget, there is no comparison of budgeted to actual revenues, since the two numbers are the same. The model is designed to match actual expenses to expected expenses, not to compare revenue levels. There is no way to highlight whether actual revenues are above or below expectations.