Which of the following is TRUE of flexible budget?

Question

BlackTom AI · Accepted Answer

A flexible budget allows management to compare actual results with budgeted results for the actual activity level.

1. Relevant knowledge points and concepts
- Flexible budget: a budget that adjusts budgeted variable costs to the actual level of activity while leaving total fixed costs unchanged. It separates costs into variable (change with activity) and fixed (do not change with short-term activity).
- Purpose: to provide a meaningful basis for variance analysis by comparing what costs should have been at the actual activity level with what actually occurred.

2. Step-by-step reasoning
- Start with the master (static) budget assumptions: budgeted units, variable cost per unit, and fixed costs.
- When actual activity differs, compute the flexible budget by multiplying variable cost per unit by actual units and adding fixed costs.
- Compare actual costs to the flexible budget amounts to compute flexible-budget variances (actual − flexible).

3. Calculations with intermediate steps (example)
- Master budget: 1,000 units; variable cost = $2/unit; fixed cost = $1,000.
- Actual activity: 1,200 units.
- Flexible budget variable cost = 1,200 × $2 = $2,400.
- Flexible budget total cost = $2,400 + $1,000 = $3,400.
- If actual total cost = $3,500, flexible-budget variance = $3,500 − $3,400 = $100 unfavorable.

4. Why the correct answer is correct
- The flexible budget explicitly adjusts budgeted variable costs to the actual activity level, so management can compare actual results to the budgeted amounts that are appropriate for the level of activity that actually occurred. This is the defining benefit of a flexible budget.

5. Why the other options are incorrect
- Option A: Incorrect — fixed costs are not adjusted for output in total; they remain the same in a flexible budget (only fixed cost per unit changes with activity).
- Option C: Incorrect — an unfavorable variance signals a deviation but is not conclusive proof of poor performance; causes can include price changes, mix, or external factors.
- Option D: Incorrect — using more input quantities than budgeted would tend to produce an unfavorable (not favorable) variable-cost variance unless offset by a larger-than-expected price decrease.

6. Conclusion
The statement "A flexible budget allows management to compare actual results with budgeted results for the actual activity level." is correct and matches the provided answer.

Which of the following is TRUE of flexible budget?单项选择题

类似问题

Which budget evaluates the results of operations at the actual level of activity?

Flexing the budget means

Variable cost per unit and total fixed costs remain constant in the relevant range. Therefore, total fixed costs should not change with the change in activity level and you would take the variable cost per unit times the new activity level to generate the flexible budget line item.

When the activity level of the master/planning/static budget differs from the activity level (cost driver, allocation base; e.g., machine hours), then a flexible budget is needed to match the same activity level that the actuals are based on to truly analyze revenue and spending variances.

The flexible budget for direct materials is computed in which of the following ways?

Laurie Inc.’s static budget for 10,000 units of production includes $60,000 for direct materials, $44,000 for direct labor, fixed utilities costs of $5,000, and supervisor salaries of $25,000. A flexible budget for 12,000 units of production would show

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