Final answer:
True, the 'Flex' in flexible budget indeed signifies that it is adaptable to changing activity levels, making it a dynamic tool for financial planning and management.
Step-by-step explanation:
The statement, "The 'Flex' in flexible budget comes from the assumption of activity levels that vary," is true. A flexible budget is designed to be adaptable, with costs that can fluctuate depending on actual levels of activity within a business.
This means that as the volume of production, sales, or other measure of activity changes, the budgeted expenses can be adjusted to better reflect the current situation. This flexibility makes it a helpful tool for managers to use in their planning and control processes. By having a budget that adjusts to the level of activity, it provides more accurate and relevant information than a static budget, which is based on fixed assumptions.