Flexible Budget Quiz

What is a flexible budget?

• A budget prepared for a single level of activity

• A budget that remains constant irrespective of activity levels

• A budget that changes with changes in the level of activity

• A budget prepared for a long-term period

Which of the following is a key feature of a flexible budget?

• Fixed costs remain unchanged

• It is based on historical data only

• It adjusts for various levels of activity

• It eliminates the need for variance analysis

In a flexible budget, which costs vary directly with the level of activity?

• Fixed costs

• Variable costs

• Semi-variable costs

• Overhead costs

A flexible budget is most useful for which of the following purposes?

• Forecasting fixed expenses

• Controlling costs based on actual activity levels

• Planning for long-term investments

• Allocating fixed resources

What is the first step in preparing a flexible budget?

• Identifying fixed costs

• Determining the range of activity levels

• Analyzing the variance

• Calculating the total cost

If production increases, which cost will likely remain unchanged in a flexible budget?

• Direct material costs

• Fixed factory rent

• Direct labor costs

• Utilities

Which of the following statements is true about flexible budgets?

• They are rigid and cannot be adjusted once prepared

• They are only suitable for fixed costs

• They help in performance evaluation by comparing budgeted and actual results

• They do not require any assumptions about cost behavior

A flexible budget is prepared:

• After actual activity levels are known

• Only for financial accounting purposes

• Without considering variable costs

• Without any regard for cost behavior

Which of the following is not a step in flexible budgeting?

• Determining fixed and variable costs

• Identifying the relevant activity range

• Preparing a standard cost card

• Calculating variances in advance

The fixed cost for a factory is ₹10,000, and the variable cost per unit is ₹15. If the production level is 1,000 units, what is the total cost in the flexible budget?

• ₹15,000

• ₹25,000

• ₹10,000

• ₹20,000