The correct answer is D.
A static budget is a budget that is prepared for a single level of production. It is based on the assumption that the level of production will remain constant throughout the budget period. A flexible budget, on the other hand, is a budget that is prepared for a range of production levels. It takes into account the fact that the level of production may vary throughout the budget period.
A flexible budget is more accurate than a static budget because it takes into account the actual level of production. This allows management to compare actual results to a budget that is more closely aligned with actual conditions.
A flexible budget can be prepared for any production level within a relevant range. The relevant range is the range of production levels over which the cost relationships are expected to remain constant.
A static budget is based on one specific level of production. This level of production is usually the expected level of production for the budget period.
Option A is incorrect because a flexible budget considers both variable and fixed costs. Variable costs are costs that change in proportion to the level of production. Fixed costs are costs that remain the same regardless of the level of production.
Option B is incorrect because a flexible budget does not allow management latitude in meeting goals. A flexible budget is based on the actual level of production, so management must still meet the goals that are set in the budget.
Option C is incorrect because a flexible budget can be prepared for any department within a company. It is not limited to a single department.