A fixed budget remains unchanged regardless of the actual level of activity attained. It is based on a single level of activity and cannot be used for cost control since actual output often differs from the budgeted output. A flexible budget adjusts to changes in actual revenue levels by generating a budget specific to the inputs once an accounting period is complete, allowing for a reliable comparison of actual expenses. A flexible budget is prepared for a range of activity levels and provides expense goals for managers.
A fixed budget remains unchanged regardless of the actual level of activity attained. It is based on a single level of activity and cannot be used for cost control since actual output often differs from the budgeted output. A flexible budget adjusts to changes in actual revenue levels by generating a budget specific to the inputs once an accounting period is complete, allowing for a reliable comparison of actual expenses. A flexible budget is prepared for a range of activity levels and provides expense goals for managers.
A fixed budget remains unchanged regardless of the actual level of activity attained. It is based on a single level of activity and cannot be used for cost control since actual output often differs from the budgeted output. A flexible budget adjusts to changes in actual revenue levels by generating a budget specific to the inputs once an accounting period is complete, allowing for a reliable comparison of actual expenses. A flexible budget is prepared for a range of activity levels and provides expense goals for managers.
• Designed to remain unchanged irrespective of the level of
• activity actually attained SUITABILITY FOR FIXED BUDGET • Based on a single level of activity • When the nature of business is not • Cannot be used for the purpose of cost control since seasonal. • actual output is often significantly different budgeted • output . • There is no impact of external factors on the business • Since units are overlooked , a cost to cost comparison • activities. • without considering the units may give misleading results • The demand of the products is certain and stable
• Supply orders are issued regularly
• Supply of production inputs is regular
FLEXIBLE BUDGET A flexible budget adjusts to changes in actual revenue levels. Actual revenues or other activity measures are entered into the flexible budget once an accounting period has been completed, and it generates a budget that is specific to the inputs. The budget is then compared to actual expenses for control purposes.
• Prepared for a range more than one level of activity
• Set of alternative budgets to different expected levels of
• activity
• Provides a reliable basis for comparison as it is
• automatically geared to change in production activity
• Provides expenses goals for managers of responsibility