Which budget type is prepared under various assumptions that would include the range of volumes that could reasonably be expected?

The flexible budget is prepared under various assumptions about the volume of activities, allowing for adjustments based on changes in those activity levels. This type of budget is particularly useful in adapting to different scenarios, as it accommodates fluctuations in output or sales volume.

For example, if a company expects to have a range of patient visits in a healthcare setting, a flexible budget would adjust expenses and revenues based on the actual number of visits, giving management a clearer picture of performance against the budget. This adaptability is what makes flexible budgets effective for managers when planning and analyzing variances from expected performance.

In contrast, a fixed budget does not change with the volume of activity; it remains static regardless of actual performance, which can limit its usefulness in dynamic environments. A cash budget primarily focuses on inflows and outflows of cash, while an operating budget outlines the expected revenues and expenses for a specific period without the flexibility to adjust for varying activity levels. Thus, the flexible budget stands out as the most appropriate choice for preparing under varying assumptions regarding the range of expected volumes.