Flexible budget or variable budget differs from static or fixed budget because it is a set of budgets for different expected levels of activities. It helps to overcome the constraints of fixed budget which is prepared for a single expected level of activity.
The important characteristics of flexible budget can be pointed as follows:
1. Wide Range
Flexible budget covers a range of activities because it is prepared to show the expected cost and revenue for different levels of activities.
2.. Flexibility
Flexibility is another notable characteristic of flexible budget as it is easy to change according to variations of production and sales levels.
The important characteristics of flexible budget can be pointed as follows:
1. Wide Range
Flexible budget covers a range of activities because it is prepared to show the expected cost and revenue for different levels of activities.
2.. Flexibility
Flexibility is another notable characteristic of flexible budget as it is easy to change according to variations of production and sales levels.
3. Performance Evaluation
Flexible budget facilitates performance measurement and evaluation. It helps the management to evaluate the actual performance and efficiency with predetermined estimates.
4. Changes
It takes into account the changes in the volume of activity.
5. Replace Of Static Budget.
Flexible budget helps to overcome the limitations of of static budget by replacing it.
Steps To Be Followed For Preparing A Flexible Budget:
* To decide the range of activities for which the budget is to be prepared.
* To determine the cost behavior i.e. fixed, variable or semi-variable.
* To select the activity level for preparing the budget.
* To prepare flexible budget at each selected levels.