Flexible and Static Budgets|Essay pro
Posted: February 16th, 2023
Budgeting is a tool used by management for performing the functions of planning, coordinating, and controlling operations of a business. Our textbook, Managing Accounting Concepts, describes 2 main types of budgeting: static budgets and flexible budgets.
write a minimum of 175 words:
Differentiate between the 2 types of budgets.
Provide an example of the type of business or company that would benefit from using a flexible budget.
Provide support for your business selection and include the advantage for using a flexible budget over a static budget.
SOLUTION
Budgeting is a vital tool that helps management perform various functions of planning, coordinating, and controlling operations of a business. Two primary types of budgets are static budgets and flexible budgets. Static budgets are prepared based on a fixed level of output, while flexible budgets adjust to changes in production levels.
A static budget is based on a fixed level of output or sales volume, and it does not change, irrespective of the actual output produced. The static budget is an effective planning tool for a company that has a stable production process and predictable revenue. On the other hand, a flexible budget adjusts to changes in production levels, and it is an effective tool for controlling costs in companies with varying production levels. The flexible budget adjusts the cost and revenue expectations, which can help managers understand how changes in production levels can affect the bottom
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