The purpose of creating a flexible budget is to:
A)Determine how much of the difference between actual and budgeted profits was due strictly to the difference between budgeted and actual sales.
B)Determine how much of the difference between actual and budgeted profits was due strictly to the difference between budgeted and actual variable costs.
C)Determine how much of the difference between actual and budgeted profits was due strictly to the difference between budgeted and actual fixed costs.
D)Determine which department is responsible for the overall budget variance.

Question

Quizplus · Accepted Answer

The purpose of creating a flexible budget is to determine how much of the difference between actual and budgeted profits was due strictly to the difference between budgeted and actual sales. A flexible budget adjusts to changes in activity levels, allowing for a more accurate analysis of the effect of changes in sales on profits. By comparing actual results to a flexible budget based on the actual level of activity, the portion of the variance due to sales volume can be isolated.

The Purpose of Creating a Flexible Budget Is To