The correct answer is: D. Is a plan for a single level of sales (or other measure of activity), while a variable budget consists of several plans, one for each of several levels of sales (or other measure of activity)
A fixed budget is a budget that is prepared for a single level of activity. It is based on the assumption that costs will remain constant at that level of activity. A variable budget, on the other hand, is a budget that is prepared for a range of activity levels. It takes into account the fact that costs will vary with the level of activity.
A fixed budget is useful for planning and control when the level of activity is relatively stable. However, it can be misleading if the level of activity changes significantly. A variable budget is more accurate than a fixed budget when the level of activity is variable. It allows managers to see how costs will change as the level of activity changes.
Here is a brief explanation of each option:
- Option A: This is incorrect because a fixed budget includes both fixed and variable costs. Fixed costs are costs that do not change with the level of activity, while variable costs are costs that change with the level of activity.
- Option B: This is incorrect because a fixed budget is concerned with all expenses, not just expenses which vary with sales.
- Option C: This is incorrect because a fixed budget can be changed after the period begins, but it is not usually done. A variable budget is more likely to be changed after the period begins, because it is more flexible.
- Option D: This is the correct answer because a fixed budget is a plan for a single level of sales (or other measure of activity), while a variable budget consists of several plans, one for each of several levels of sales (or other measure of activity).