1 The flexed budget is prepared at the same level of activity as actual output
2 The difference between the flexed budget profit and the actual profit shows the effect on profit of operating at a level of activity that differs from the expected level
1 only
Tutorial note: The effect on profit of operating at a different level of activity to the one budgeted is the difference between the flexed budget profit and the originally budgeted profit (not the actual profit).
why is 2 wrong? arent we suppose to compare the flexed budget with the actual budget?