What Is the Primary Difference Between a Static Budget and a Flexible

question 51

Multiple Choice

What is the primary difference between a static budget and a flexible budget?

• A) The static budget contains only fixed costs while the flexible budget contains only variable costs.
• B) The static budget is prepared for a single level of activity while a flexible budget is adjusted for different activity levels.
• C) The static budget is constructed using input from only upper level management while a flexible budget obtains input from all levels of management.
• D) The static budget is prepared only for units produced while a flexible budget reflects the number of units sold.

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Definitions:

Diminishing Returns

Diminishing returns is an economic principle stating that as more investments or resources are added to a production process, the incremental gain in output will eventually decrease if all other factors remain constant.

Disguised Unemployment

Situations where more people are employed in a task or job than is necessary for its completion, leading to inefficiency.

Capital Goods

Long-term assets such as buildings, machinery, and equipment purchased by businesses to produce goods and services.

Terms of Trade

The ratio of an index of a country's export prices to an index of its import prices, used to measure the relative trading advantage or disadvantage.