What is a fixed budget?

What is a fixed budget?

• A. The original budget set up for budgeted sales and production
• B. A budget which is designed to change with volume
• C. A budget for marketing
• D. A flexible budget

Answer: (A)

A fixed budget is prepared for a single, planned level of activity and remains unchanged regardless of actual volume. It represents the original budget set at the start for budgeted sales and production, and does not adjust as activity changes. This is why the description of the original budget for budgeted sales and production fits best, unlike budgets that are designed to change with volume (flexible budgets) or budgets focused on a specific function like marketing.

A fixed budget is prepared for a single, planned level of activity and remains unchanged regardless of actual volume. It represents the original budget set at the start for budgeted sales and production, and does not adjust as activity changes. This is why the description of the original budget for budgeted sales and production fits best, unlike budgets that are designed to change with volume (flexible budgets) or budgets focused on a specific function like marketing.