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In a flexible budget, what remains constant?

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Question: In a flexible budget, what remains constant?

Options:

  1. Variable costs per unit
  2. Total fixed costs
  3. Total variable costs
  4. Sales price per unit

Correct Answer: Total fixed costs

Solution: 

In a flexible budget, total fixed costs remain constant regardless of the level of activity.

In a flexible budget, what remains constant?

Practice Questions

Q1
In a flexible budget, what remains constant?
  1. Variable costs per unit
  2. Total fixed costs
  3. Total variable costs
  4. Sales price per unit

Questions & Step-by-Step Solutions

In a flexible budget, what remains constant?
  • Step 1: Understand what a flexible budget is. A flexible budget adjusts based on the actual level of activity or output.
  • Step 2: Identify the components of a budget. A budget typically includes fixed costs and variable costs.
  • Step 3: Recognize that fixed costs are expenses that do not change with the level of activity. Examples include rent and salaries.
  • Step 4: Realize that in a flexible budget, while variable costs change with activity, total fixed costs remain the same.
  • Step 5: Conclude that the constant element in a flexible budget is the total fixed costs.
  • Flexible Budget – A flexible budget adjusts costs based on the actual level of activity, distinguishing between fixed and variable costs.
  • Fixed Costs – Costs that do not change with the level of production or sales, remaining constant within a relevant range.
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