Question

The primary difference between a static budget and a flexible budget is that a static budget :

a. Is concerned only with future acquisitions of fixed assets, whereas a flexible budget is concerned with expenses that vary with sales.

b. Includes only fixed costs, whereas a flexible budget includes only variable costs.

c. Is suitable in volatile demand situation while flexible budget is suitable in a stable demand situation.

d. Is a plan for a single level of production, whereas a flexible budget can be converted to any level of production.

Answer 1

The correct answer is D

Step-by-step explanation:

Static budget is the budget in which the amounts will not vary even though there are changes in the volume. Whereas the flexible budget is the budget which adjusts or flexes along with the changes in the volume or activity.

Therefore, the key difference among the static budget and the flexible budget is the static budget is a plan which is for single level of the production and the flexible budget is for any level of production.