What characterizes a flexible budget?

A flexible budget is characterized by its ability to adjust to varying levels of activity or volume. It is not simply a series of fixed budgets; rather, it is created to allow for revenue and expense projections to fluctuate based on actual activity levels. This means that for different levels of output or sales, the budget adjusts dynamically, providing a more accurate reflection of what costs and revenues would be under those circumstances.

By incorporating variable costs that change with production levels and being able to adapt to changes in sales or service volumes, a flexible budget enables management to make informed decisions and carry out performance evaluations more effectively. The essence of a flexible budget is its responsiveness to changes in business activity, which helps organizations maintain better control over their financial performance.

In contrast to this, other options describe either static conditions or fixed cost limitations, which do not encapsulate the adaptability that defines a flexible budget.