A(n) _____ budget is based on one predicted amount of sales or other activity measure.

A(n) _____ budget is based on one predicted amount of sales or other activity measure.

• A. Flexible
• B. Fixed
• C. Rolling
• D. Incremental

Answer: (B)

A fixed budget is based on a single predicted amount of sales or other activity measure. It is set at the outset and doesn’t change with actual activity, so it serves as a static benchmark for evaluating performance. This contrasts with a flexible budget, which adapts to different levels of activity; a rolling budget, which is continuously updated with new forecasts; and an incremental budget, which starts from the prior period’s numbers plus a fixed increment rather than a single forecast level.

A fixed budget is based on a single predicted amount of sales or other activity measure. It is set at the outset and doesn’t change with actual activity, so it serves as a static benchmark for evaluating performance. This contrasts with a flexible budget, which adapts to different levels of activity; a rolling budget, which is continuously updated with new forecasts; and an incremental budget, which starts from the prior period’s numbers plus a fixed increment rather than a single forecast level.