Question

Give an example of an organization in which flexible budgeting would be impractical?

Please explain your answer.

Answer 1

An organization wherein flexible budgeting would be impractical will be a telecom company such as Verizon Wireless. A flexible budget adjusts costs and revenues in accordance with the variation in the level of output. However, in the telecom industry most of the costs are fixed. The rent of the sites are fixed and fixed cost energy models are used. Whatever be the number of subscribers, these costs shall remain the same. Thus, using a flexible budget becomes impractical. A static budget is more appropriate.