A budgeting process that analyses costs into their fixed and variable elements using the actual activity levels is referred to as:

A. Fixed Budgeting
B. Flexible Budgeting
C. Activity Based Budgeting
D. Zero Based Budgeting
E. Marginal Costing

 

Answer: B. Flexible Budgeting

Explanation: Flexible budgeting involves adjusting the budget to reflect actual activity levels, categorizing costs as either fixed or variable. Unlike fixed budgets, which remain static regardless of production levels, flexible budgets allow for a more accurate reflection of expenses based on actual operations. This makes it particularly useful in industries where costs fluctuate with changes in production or service activity.