Question

What is a flexible budget and how does it differ from a static planning budget? PLEASE...

What is a flexible budget and how does it differ from a static planning budget?

PLEASE BE VERY DETAILED :)

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Answer #1

Solution. A business exists to do business to meet its pre-determined goals/objectives. Budgets are prepared to provide with an estimation of cash flows along with a tool to measure performance efficiency.

Flexible budget is a variable budget encompasses current operational revenues and expenses and changes in the same with alteration in volume/output level. Whereas, static planning budget encompasses fixed data and does not alter with alteration in output level.

Flexible budget involves cost changes with changes in activity level and thereby increasing efficiency whereas, static planning budget involves anticipated values and does not require any updation of data during the accounting period.

Flexible budget provides with control measurement of variances whereas, static planning budget provides with measurement of sales performance.

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