The correct answer is: A. flexible budget.
A flexible budget is a budget that is adjusted for changes in the level of activity. It is prepared by taking the original budget and making changes to the variable costs based on the actual level of activity. This allows managers to see how their costs will change if the level of activity changes.
A master budget is a comprehensive financial plan for a company. It includes budgets for all aspects of the company’s operations, such as sales, production, and expenses. The master budget is prepared at the beginning of the year and is used to guide the company’s operations throughout the year.
A cash budget is a financial plan that shows how a company expects to receive and spend cash over a period of time. It is used to ensure that the company has enough cash on hand to meet its obligations.
A sales budget is a financial plan that shows how much a company expects to sell in a given period of time. It is used to determine the level of production and inventory that the company needs to maintain.
The difference between fixed and variable costs is important in the preparation of a flexible budget because it allows managers to see how their costs will change if the level of activity changes. This information is important for making decisions about pricing, production, and inventory levels.