Answer (A) is correct . A flexible budget is a series of budgets prepared for various levels of sales and production. Another view is that it is based on cost formulas, or standard costs. Thus, the cost formulas are fed into the computerized budget program along with the actual level of sales or production. The result is a budget created for the actual level of activity.
Answer (B) is incorrect because A capital budget is a means of evaluating long-term investments and has nothing to do with standard costs.
Answer (C) is incorrect because A zero-based budget is a planning process in which each manager must justify a department’s entire budget each year. The budget is built from the base of zero each year.
Answer (D) is incorrect because A static budget is for one level of activity. It can be based on expected actual or standard costs.
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