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Assume you are the production manager for a manufacturing company that anticipated selling 40,000 units of...

Assume you are the production manager for a manufacturing company that anticipated selling 40,000 units of product for the master budget and actually sold 50,000 units. Why would you prefer to be evaluated using a flexible budget for direct labor rather than the master budget?

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The main purpose of master budget is to combine many small & sub organisation budgets into one budget & which contains budgeted incomes & expenses for the upcoming year assuming a particular level of activity .Thus master budget is also called static budget as it is prepared for single level of activity.

Whereas in flexible budget , the main purpose is to prepare budgets at multi level of activities for better comparision of actual results with respective level of activity.

Conclusion : Since direct labor is a variable cost & it differs with change in level of activities (output) , thus it is preferable to use flexible budget for direct labor rather than the master budget

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