Final answer:
A flexible budget contains budgeted amounts for actual output, providing an adjustable financial plan that aligns costs with the level of actual activity and aids management in making informed decisions.
Step-by-step explanation:
The flexible budget is a financial tool that adjusts budgeted cost levels to the actual level of output rather than having fixed budgeted amounts. Therefore, a flexible budget contains A) budgeted amounts for actual output.
A flexible budget provides various budgeted data depending on the level of activity accomplished. It is essentially a series of static budgets at different levels of activity. Unlike a static budget, which remains at one level of predicted activity, the flexible budget adjusts and considers changes in the amount of revenue, expenses, and other costs based on the actual activity levels. By doing so, it becomes a useful tool for comparing actual performance against the budgeted figures that were expected to align with the actual activity levels. This comparison is critical for cost control and allows management to understand the financial implications of operational decisions.
Managers can use flexible budgets to make more informed decisions about costs, efficiency, and operations by seeing how the numbers should look had the company operated at the actual level of output achieved.