COST ACCOUNTING
FLEXIBLE BUDGETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Flexible budgets are prepared for one specific activity level
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Total variable costs change in direct proportion to changes in activity
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Total fixed costs change within the relevant range
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Detailed explanation-1: -Answer and Explanation: It is true that total variable costs change in proportion to changes in the volume of activity.
Detailed explanation-2: -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-3: -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-4: -A flexible budget is a budget that is created using a specific cost or formula. Unlike a static budget, a flexible budget includes both fixed and variable costs that can be adjusted based on revenue percentage or production cost incurred throughout the course of the budget period.
Detailed explanation-5: -A budget that will be changed at the end of every month in order to reflect the actual costs of a department.