Differences Between Static Budget And Flexible Budget

Following are the main differences between static and flexible budget:

1. Nature
A static budget does not change with the actual volume of the output achieved. A flexible budget is designed to change appropriately with the level of activity attained.

2. Scope
A static budget cannot ascertain costs correctly in case of any change in circumstances. Flexible budget can easily ascertain costs in different levels of activities.

3. Determination Of Cost
Static budget is prepared under the assumption that all conditions will remain unaltered. Flexible budget is prepared at different levels of activities considering the possible changes in the operational aspect of a business.

4. Assumptions
Static budget has a limited application and is ineffective as a tool for cost control. Flexible budget has a wide application as an effective tool for cost control.

5. Pre-requistes
Static budget is prepared without classifying the costs according to their variable nature. Flexible budget is prepared by classifying the costs according to their variable nature.

Related Topics
Concept And Meaning Of Flexible Budget
Characteristics And Steps For Preparing Flexible Budget
Importance Or Advantages Of Flexible Budget
Preparation Of Flexible Budget Using Formula Approach