What is a flexible budget and how does it differ from a static planning budget?

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23-08-2022
Business

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What is a flexible budget and how does it differ from a static planning budget?

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rafikiedu03 rafikiedu03 · Answer 1 · 2022-08-26T23:23:44+02:00

A flexible budget is one that is allowed to adjust based on a change in the assumptions used to create the budget during management's planning process. A static budget, on the other hand, remains the same even if there are significant changes from the assumptions made during planning.

A flexible budget adjusts based on modifications in real revenue or other activities. The result is financed within reason closely aligned with real effects. This approach varies from the extra commonplace static price range, which incorporates nothing but constant rate quantities that don't vary with actual sales levels.

A static budget is a budget that makes use of anticipated amounts for a given period prior to the period beginning. The unique element of a static budget is that it does not change irrespective of deviations in sales and prices.

The process of a flexible budget lets you alter spending throughout the 12 months; advantages consist of much less overspending, more possibilities, and faster responses to changing market and business conditions.

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