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Sagot :
The flexible budget is the optimum budget to managers that plan revenues and expenses at different sales volumes.
What is a flexible budget?
- According to changes in actual revenue or other activities, a flexible budget can be adjusted.
- The end result is a budget that closely matches actual outcomes. This strategy differs from the more typical static budget, which only lists fixed spending figures that don't change in accordance with actual revenue levels.
- Instead of using the customary set amounts, the flex budget allocates certain expenses as percentages of revenue. This enables an infinite number of adjustments to be made to anticipated costs that are directly related to actual income received.
- This method, however, ignores adjustments to other expenditures that don't alter in response to slight variations in revenue.
The flexible budget is a useful tool for assessing the performance of managers since it adjusts itself based on activity levels; the budget should nearly match expectations at any number of activity levels.
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