What makes flexible budgeting necessary? A. Variable costs change with the level of activity. B. Fixed...

What makes flexible budgeting necessary?

	A.	Variable costs change with the level of activity.
	B.	Fixed costs do not change with the level of activity.
	C.	Employees are basically dishonest.
	D.	Costs are fixed for the most part.

Expert Solution

The variable costs per unit remains constant but it changes with the level of activity. To flex the activity, flexible budget is prepared, where the variable cost per unit is directly multiplied with the level of activity. The fixed cost remains the same under all levels of activity.

Option A, Variable costs change with the level of activity is the correct option, because of the nature of variable cost, Flexible budget is required to be made.

Option B, Fixed costs do not change with the level of activity is the incorrect option, as when there is no change of costs with the level of activity, flexible budget is not required.

Option C, Employees are basically dishonest is incorrect option, as there is no relation of employees with the flexible budget necessity.

Option D, Costs are fixed for the most part is incorrect option, as nature of variable cost makes flexible budget necessary.

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What makes flexible budgeting necessary? A. Variable costs change with the level of activity. B. Fixed...

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Expert Solution

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