Which statements is correct concerning a flexible budget?
A)A flexible budget is not appropriate when costs and expenses are affected by fluctuations in volume limits.
B)A flexible budget is appropriate for any relevant level of activity.
C)A flexible budget is appropriate for control of factory overhead but not for control of direct materials and direct labor.
D)A flexible budget is appropriate for control of direct materials and direct labor but not for control of factory overhead.

Question

Quizplus · Accepted Answer

A flexible budget is appropriate for any relevant level of activity as it adjusts the budgetary figures based on the level of activity or volume. It provides a more accurate reflection of what the costs and revenues should be at that particular activity level, regardless of whether it is higher or lower than the planned level. Option A is incorrect because fluctuations in volume limits are precisely why a flexible budget is necessary. Options C and D are incorrect because a flexible budget applies to all types of costs, including factory overhead, direct materials, and direct labor.

Which Statements Is Correct Concerning a Flexible Budget