Which statement best describes a flexed budget?

• A. Uses the original budget figures for actual sales and production.
• B. Uses actual costs at the original level of activity.
• C. Is identical to the master budget.
• D. Only reports variances after the period.

Answer: (A)

A flexed budget adjusts the original budget to match the actual level of activity. It takes the actual sales and production quantities and applies the original budget’s cost rates to those quantities, showing what costs should have been if the business had operated at the real level of activity. This lets you compare actual costs to what was expected for the actual activity, highlighting variances due to price or efficiency while removing the volume effect.

So the described option matches this idea: it uses the actual activity levels (sales and production) and the original budget figures (per-unit costs and budgeting assumptions) to determine the expected costs. The other statements don’t capture that adjustment to actual activity levels, or mix in actual costs or timing aspects that aren’t what a flexed budget represents.