Flexible Budget
What is Flexible Budget?
The flexible budget is a budget that modify or flexes for changes in the volume of activity. The flexible budget is writer sophisticated and practicable than a static budget, which remains at one amount heedless of the volume of activity. Ahead a flexible budget can be produced, managers must consider which costs are fixed and which are varied. For example, a flexible budget may make 6% more money usable to its research and development department if its revenue increases 6%.
The flexible budget reacts to changes in activity, and may allow for a better tool for performance evaluation. flexible budget is driven by the expected cost behavior.
The flexible budget-based performance evaluation allow for a treat for this phenomenon. The fixed budget is ready based only on one level of output. Therefore, if the level of output really attain differs substantially from that budgeted, large variances will arise.
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