The Primary Difference Between a Static Budget and a Flexible

question 35

Multiple Choice

The primary difference between a static budget and a flexible budget is that a static budget

• A)is suitable in a volatile demand situation while a flexible budget is suitable in a stable demand situation
• B)is concerned only with future acquisitions of fixed assets, whereas a flexible budget is concerned with expenses that vary with sales
• C)includes only fixed costs, whereas a flexible budget includes only variable costs
• D)is a plan for a single level of activity, whereas a flexible budget adjusts for changes in the activity level

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Definitions:

Raw Material Costs

The expense associated with the basic materials required in the production of goods.

Direct Labour Costs

Direct Labour Costs refer to the wages paid to workers directly involved in manufacturing or producing goods, in contrast to indirect labor involved in supportive roles.

Building Rental Costs

The expenses incurred for leasing a facility or space for business operations.

Fixed Cost

A cost that does not change with the level of output or production, such as rent or salaries.