CA Intermediate · Cost and Management Accounting · Budgets and Budgetary Control
A budget committee in Chennai sets a budget for a department that is prepared for a fixed level of activity and is not adjusted even if actual activity differs. What is such a budget called?
Such a budget is called a fixed budget. It is prepared for one predetermined activity level and is not revised when actual activity differs, unlike a flexible budget, which is recast for the actual level of activity.
- AFixed budgetCorrect
- BFlexible budget
- CZero base budget
- DMaster budget
Explanation
A fixed budget is designed for one level of activity and remains unchanged regardless of actual output. A flexible budget changes with activity levels. Zero base budgeting is a method of building budgets, and the master budget is the summary of all functional budgets.
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