ACCA Applied Skills · Performance Management · Budgetary systems and types of budget
Which statement about a fixed budget is correct?
A fixed budget is not adjusted for actual activity once it has been set. It is prepared for a single planned level of activity, so comparing it with actual results at a different volume can make variances misleading. Flexible budgets are the ones that change with output.
- AIt is not adjusted for actual activity levels once setCorrect
- BIt changes in line with actual output
- CIt is updated every month for a new period
- DIt begins each period with no allowance for prior spending
Explanation
A fixed budget is set for a single activity level and is not changed when actual activity differs. Adjusting for output describes a flexible budget, updating for a new period describes a rolling budget, and starting from zero describes zero-based budgeting.
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