ACCA Applied Knowledge · Management Accounting · Flexible budgets
Which statement about preparing a flexible budget is correct?
In a flexible budget, variable cost per unit stays constant and totals are recalculated at the actual activity level. Fixed costs remain unchanged within the relevant range, which allows a like-for-like comparison with actual results.
- AFixed costs are flexed in proportion to activity
- BBudgeted selling price per unit is flexed with activity
- CVariable costs per unit are held constant and totals are recalculated at actual activityCorrect
- DThe flexed budget is prepared at the original budgeted activity level
Explanation
A flexible budget recalculates variable costs and revenue at actual activity using unit rates, while fixed costs are held constant within the relevant range. Flexing fixed costs is wrong, and the original activity level is the fixed budget.
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