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:

Profit-maximizing Output

The level of production at which a company can achieve the highest possible profit, determined by the intersection of marginal cost and marginal revenue.

Demand

The quantity of a good or service that consumers are willing and able to purchase at each possible price level.

Cost Data

Information regarding the expenses incurred in the production, operation, or undertaking of a project, activity, or product.

Monopolistically Competitive

An arrangement in the economy where countless firms are selling products that look similar but are unique, thus permitting them a slight advantage in the market.