Final answer:
A flexible budget is a budgeting system that adjusts expenses based on the level of actual activity, making it a dynamic tool for performance evaluation and management decision-making.
Step-by-step explanation:
The budgeting system designed to change in relation to the level of activity actually attained is known as a flexible budget. A flexible budget adjusts budgeted revenue and cost levels depending on actual output levels, offering a more dynamic approach to budgeting compared to a static budget, which remains constant regardless of changes in activity levels.
The flexible budget is an invaluable tool for providing a more accurate depiction of budgeted versus actual results, aiding in performance evaluation and management decision-making. In essence, it aligns more closely with the budget constraint framework, reflecting the impacts of changes in income or price.