The main difference between a static and flexible budget is that

Multiple Choice

• static budget is used in the service industry while flexible budget is used for manufacturing sector only.

• static budget is constructed using standard costs while the flexible budget uses a zero-based approach.

• static budget is prepared for a single level of activity while a flexible budget can be flexed for different activity levels.

• static budget is more useful for performance measurement purposes.

• The flexible budget variance is caused by the difference in the sales volume between budgeted and actual activity.