Quiz 11: Flexible Budgets and Overhead Analysis
Static budget and flexible budget are two different forms of budget which is formed by any organization depend on situations. Static budget is a budget which created well in advance before getting into that activity for which budget has been prepared. It will help an organization to estimate overall cost which they have to incur during commencement of project. Flexible projects are that project which are a prepared for particular division or activity. It is prepared during course of business in order to overcome budgetary problem for particular activity of a business. It is flexible as company has to re create this budget according to the situation of company's activity
D) For performance reporting it is beneficial for firm to use flexible budget as compared to any other budget. This is because it separately shows or it is prepared on the basis of division of costs like fixed and variable cost. Flexible budget takes these both costs separately into consideration that's why it is more beneficial than any other.
Flexible budget are prepared to improve the performance of an organization. Its prepares in between to raise a level of activity for which it is prepared where as static budget is a like master budget which is an estimated cost is projected and based on that over all functioning of a company take place. So flexible budget is more superior as one can flexible enough to change budget as per activity and time which is occurring.