A Flexible Budget Can Be Prepared for Which of the Following Budgets Comprising the Master Budget?

The budget tin can be understood as a quantitative plan that acts as an guess of future operation. Based on the Capacity, in that location are two types of budgets prepared in cost bookkeeping, namely, stock-still budget and flexible budget. Stock-still Budget is a budget that remains constant, irrespective of the levels of activity, i.e. the budget is created for a standard book of production. On the contrary,

Flexible Budget can be understood as the budget created for different production levels or chapters utilization, i.eastward. it changes in accord with the activity level. While stock-still budget operates in only production level and under but one ready of status, flexible budget comprises of several budgets and works in different atmospheric condition.

When one is working on a upkeep, he/she should have a thorough knowledge of the differences between stock-still budget and flexible budget, to give desired results.

Content: Fixed Budget Vs Flexible Budget

1. Comparing Chart
2. Definition
3. Cardinal Differences
4. Conclusion

Comparison Nautical chart

Footing for Comparison	Fixed Budget	Flexible Upkeep
Significant	The budget designed to remain constant, regardless of the activity level reached is Fixed Upkeep.	The budget designed to modify with the change in the action levels is Flexible Budget.
Nature	Static	Dynamic
Activeness Level	Only 1	Multiple
Performance Evaluation	Comparison between actual and budgeted levels cannot exist done accurately, if in that location is a distinction in their activity levels.	Information technology provides a expert base for making a comparison between the actual and approaching levels.
Rigidity	Fixed Upkeep cannot be modified as per the bodily volume.	Flexible budget can be easily modified in accordance with the activity level attained.
Estimates	Based on supposition	Realistic and Applied

Definition of Stock-still Budget

For agreement the term stock-still budget, first, know the significant of the two words fixed and budget. Fixed means house or stable, and budget is an gauge of economic activities of the concern. So in this mode, Fixed Budget refers to an estimate of pre-determined incomes and expenditures, which once prepared, does not modify with the variations in the activity levels accomplished. It is besides known as Static Upkeep.

Fixed Budget is all-time suited for the organisations where there are fewer chances of fluctuations in the prevailing conditions or if the organisation is non influenced by the change in the external factors and the forecasting can be done easily to give close results. It too works as a yardstick to control costs.

Fixed Upkeep helps the management to prepare the revenues and expenses for the flow, simply information technology lacks accuracy considering it is non always possible to correctly make up one's mind future needs and requirements. Further, it operates only on a single activity level under but one condition. While framing the fixed budget, it is assumed that the existing weather condition are not going to be changed shortly, which proves untrue. Then in this way, it difficult to measure the performance, efficiency or capacity.

Definition of Flexible Budget

Flexible means easily adaptable, and Budget refers to an anticipated plan made for the fiscal activities of the entity. Therefore, the flexible upkeep is a financial programme created for different activeness levels. It tin exist freely adjusted or re-casted on the basis of output produced. Information technology is logical and practical because the cost can be hands adamant at diverse activity levels.

While preparing a flexible upkeep, first of all, the costs are divided into three major segments, namely: fixed, variable and semi-variable where semi- variable costs are further classified into fixed and variable cost, and and so the budget is designed accordingly. Some budgets are prepared for culling output levels to bear witness the amount of expense to be reached at each level of activity.

Flexible Budget is best suited for the system where there is a high caste of variability in sales and productions, or the industries which can be easily affected past the external factors or fluctuations in the market place conditions are relatively high etc.

Key Differences Between Fixed Budget and Flexible Budget

The following are the major differences between fixed budget and flexible budget:

1. The budget, which remains abiding, regardless of the bodily output levels is known as Fixed Upkeep. The flexible budget is a budget which tin be hands adjusted according to the output levels.
2. Stock-still Budget is static in nature while Flexible Budget is dynamic.
3. Fixed Budget operates in just one activity level, just Flexible Upkeep tin be operated on multiple levels of output.
4. Stock-still Budget is based on the assumption, whereas Flexible Upkeep is realistic.
5. Fixed Budget is inelastic, as it cannot be re-casted as per the actual output. Conversely, the Flexible budget is elastic because it can exist hands adapted co-ordinate to the volume of the production.
6. Flexible Budget proves more accurate to evaluate the performance, capacity and efficiency of the activeness level compared to Fixed Budget.

Conclusion

Fixed Budget is mainly based on assumptions which are unrealistic and then this is non applicable to business concern concerns, just if we talk about Flexible Budget, it is more practicable. The former is does not assistance to brand a comparing if the actual and approaching outputs differ, simply the latter proves to helpful to judge the performance past comparing actual output with the budgeted targets. Toll Ascertainment is too non possible in case of fixed budget if the bodily and budgeted levels of activity vary and the same can be easily determined in the case of a flexible budget.

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