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Flexible budgets may be prepared before or after an actual period of activity. Why would management...

Flexible budgets may be prepared before or after an actual period of activity. Why would management prepare such budgets at differing time frames?

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Answer #1

Flexible Budget may be prepared at different time frames due to following reasons:

a. If the level of production varies from time to time during the year which may be due to seasonal nature of goods or due to variation in demand and supply.

b. It is difficult to predict the future demand due to new business startup or less experience

c. Business is experiencing changes in taste and preferences of customers.

d. Business is facing acute shortage of raw materials or other factor of production

e. New products or modification in products is frequent

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