Which one of the following statements regarding the difference between a flexible budget and a static budget is true? A flexible budget primarily is prepared for planning purposes, but a static budget is prepared for performance evaluation A flexible budget provides cost allowances for different levels of activity, but a static budget provides costs for one level of activity A flexible budget includes only variable costs whereas a static budget includes only fixed cost Variances will always be larger with a flexible budget than with a static budget
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
- Which one of the following statements regarding the difference between a flexible budget and a static budget is true?
- A flexible budget primarily is prepared for planning purposes, but a static budget is prepared for performance evaluation
- A flexible budget provides cost allowances for different levels of activity, but a static budget provides costs for one level of activity
- A flexible budget includes only variable costs whereas a static budget includes only fixed cost
- Variances will always be larger with a flexible budget than with a static budget
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