Question

Which of the following statements is true? Multiple Choice A flexible budget is an estimate of what revenues and costs should heve been given the actual level of activity for the period: A flexible budget is a comperison of ectual revenues and costs at the octual level of activity to the ectuel revenves and costs ineurred of the planned level of activity. A flexible budget is a comperison of ectual revenues end costs to whet they should hrve been given the plenned level of activity. A flexible budget is an estimate of what revenues and costs should hove been given the planned level of activity for the period.

Answer 1

A flexible budget is an estimate of what revenues and costs should have been given the actual level of activity for the period and provides a comparison of actual revenues and costs.

Step-by-step explanation:

A flexible budget is an estimate of what revenues and costs should have been given the actual level of activity for the period. It provides a comparison of actual revenues and costs at the actual level of activity to the actual revenues and costs incurred at the planned level of activity.

Answer 2

A flexible budget is an estimate of revenues and costs based on the actual level of activity, which allows for accurate financial performance assessment and control. Budgeting can be difficult when personal indulgences are sacrificed for cost savings. Budgets at government levels are susceptible to changes due to policy decisions and unexpected events.

Step-by-step explanation:

The correct statement regarding a flexible budget is that it is an estimate of what revenues and costs should have been given the actual level of activity for the period. Unlike static budgets that are set before the period begins and based on a fixed level of activity, a flexible budget adjusts to reflect the actual level of activity experienced during the period. This allows for a more accurate comparison and understanding of financial performance and management control.

Why is budgeting so difficult? Some reasons include the challenge of giving up personal comforts, such as daily trips to Starbucks, new music downloads, or a NetFlix subscription, due to their opportunity costs. These discretionary expenses often make adherence to a budget challenging for individuals.

On a governmental level, budgets project anticipated revenue and planned expenditures but can be subject to change due to policy decisions and unexpected events, which can significantly disrupt earlier tax and spending plans. Nonetheless, budgets are crucial for outlining policy goals and priorities, even if unexpected fiscal policy needs can arise, like in the event of recessions or wars.