The Basic Difference Between a Master Budget and a Flexible

question 147

Multiple Choice

The basic difference between a master budget and a flexible budget is that a:

• A) flexible budget considers only variable costs but a master budget considers all costs.
• B) flexible budget allows management latitude in meeting goals whereas a master budget is based upon a fixed standard.
• C) master budget is for an entire production facility but a flexible budget is applicable to single departments only.
• D) master budget is based on one specific level of production and a flexible budget can be prepared for any production level within a relevant range.

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Definitions:

Marginal Resource Cost

The additional cost incurred by a firm or economy for utilizing one more unit of a resource, used in making efficient production and resource allocation decisions.

Profit-Maximizing

The process by which a firm determines the price and output level that returns the greatest profit.

Purely Competitive

Refers to a market structure where many firms sell identical products, allowing no single firm to influence the market price.

Marginal Resource Cost

The extra cost associated with utilizing one additional unit of a resource in the production process.