Final answer:
A flexible budget is preferred over a static budget for performance evaluation and is useful for comparing costs at various activity levels, making option 'E' the correct choice for the question.
Step-by-step explanation:
The subject of this question is a flexible budget, which is a type of budget that can be used to compare actual and budgeted costs at various levels of activity.
A flexible budget adjusts based on changes in activity levels, such as production volumes or sales, making it a dynamic tool in financial management and performance evaluation.
Regarding the question's choices, a flexible budget does not parallel a static budget in format and advantages; rather, it adapts to the level of activity, providing a more accurate reflection of costs at different levels.
It is preferred over a static budget in the evaluation of performance because it can account for changes in operating conditions and allows comparison of actual results with budgeted amounts for the actual level of activity.
Thus, it provides management with a more relevant tool for performance analysis and decision-making.
In summary, the correct choice regarding the characteristics of a flexible budget would be option 'E', which is characterized by being preferable in the evaluation of performance (choice 'B') and being applicable for comparisons at various levels of activity (choice 'D').