Question

What is the difference between a static and flexible budget?

What is the difference between a static and flexible budget?

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Answer #1

Difference between static and flexible budget

Basis of comparision Fixed budget Flexible budget
Meaning remains constant regardless with the activity change with the change in level of activity
Activity one multiple
Nature static Dynamic
Estimates based on assumptions realistic and practical
Rigidity Fixed or static budget cannot be modified Flexible budget can be modified easly according to level of activity
accurate more accurate when compared to flexible budget less accurate when compared to static budget
elasticity in elasic, as it cannot be re-casted elastic that is it can be easily adjusted
Cost ascertainment not possible to ascertain cost if actual and budget levels vary the same can be ascertained in flexible budget
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