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Commercial Pilot Licence (CPAER) – Canada · Question

A company is using a flexible budget for its production costs. What is the primary purpose of a flexible budget?

A flexible budget adjusts budgeted costs and revenues for the actual level of activity achieved, allowing for a more meaningful comparison of actual results to

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Question: A company is using a flexible budget for its production costs. What is the primary purpose of a flexible budget?

Answer options:

  • To set targets for the upcoming fiscal year. ✅ To compare actual results to a budget adjusted for the actual level of activity.
  • To allocate resources across different departments.
  • To project cash flows for capital expenditures.

Correct answer: To compare actual results to a budget adjusted for the actual level of activity.

Explanation: A flexible budget adjusts budgeted costs and revenues for the actual level of activity achieved, allowing for a more meaningful comparison of actual results to what should have been spent or earned at that activity level.

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