Question

A manufacturing company experiences frequent fluctuations in production volume due to seasonal demand. Management wants a budgeting system that revises expected costs and revenues automatically whenever the level of activity changes, so that meaningful performance comparison can be made. Which type of budget would best serve this purpose?

A Fixed budget prepared for one capacity level
B Flexible budget prepared for multiple levels of activity
C Master budget consolidating all functional budgets
D Cash budget showing expected inflows and outflows
E Zero-based budget requiring fresh justification of expenses
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