Difference Between Fixed Budget and Flexible Budget

Fixed budget is inflexible and does not change with the actual volume of output achieved. ... Fixed budget assumes that conditions would remain static. Flexible budget is design to change according to changed conditions. Costs are not classified according to their variability i.e. fixed, variable and semi variable.

1. What are fixed budgets?
2. What is meant by flexible budget?
3. What is flexible budget example?
4. What are the 3 types of budgets?
5. Why flexible budget is better than fixed budget?
6. How is flexible budget cost calculated?
7. What are the characteristics of flexible budget?
8. What are the two meanings of a flexible budget?
9. What are three types of flexible expenses?
10. What are the 5 basic elements of a budget?
11. What does a flexible budget look like?

What are fixed budgets?

A budget that does not take into account any circumstances resulting in the actual levels of activity achieved being different from those on which the original budget was based. Consequently, in a fixed budget the budget cost allowances for each cost item are not changed for the variable items. Compare flexible budget.

What is meant by flexible budget?

A flexible budget adjusts to changes in actual revenue levels. Actual revenues or other activity measures are entered into the flexible budget once an accounting period has been completed, and it generates a budget that is specific to the inputs.

What is flexible budget example?

This type of budget is most often based on changes in a company's actual revenue and uses percentages of revenue rather than static numbers. For example, a flexible budget may allot 25% of a company's revenue to salary as opposed to allotting $100,000 to salary in a given year.

What are the 3 types of budgets?

There are three kinds of budget -- balanced budget, surplus budget or a deficit budget.

Why flexible budget is better than fixed budget?

Flexible budget has more application and can be used as a tool for cost control. If the budgeted and actual activity levels vary, the correct ascertainment os coasts and fixation of prices becomes difficult. Flexible budget helps in fixation of prices and submission of tenders due to correct ascertainment of coasts.

How is flexible budget cost calculated?

To compute the value of the flexible budget, multiply the variable cost per unit by the actual production volume. Here, the figure indicates that the variable costs of producing 125,000 should total $162,500 (125,000 units x $1.30).

What are the characteristics of flexible budget?

The important characteristics of flexible budget can be pointed as follows:

• Wide Range. Flexible budget covers a range of activities because it is prepared to show the expected cost and revenue for different levels of activities.
• 2.. Flexibility. ...
• Performance Evaluation. ...
• Changes. ...
• Replace Of Static Budget.

What are the two meanings of a flexible budget?

A flexible budget is a budget that adjusts or flexes with changes in volume or activity. The flexible budget is more sophisticated and useful than a static budget. (The static budget amounts do not change. They remain unchanged from the amounts established at the time that the static budget was prepared and approved.)

What are three types of flexible expenses?

Flexible expense examples include groceries, dining out, entertainment, and even utilities.

What are the 5 basic elements of a budget?

All basic budgets have the same elements: income, fixed expenses, variable expenses, discretionary expenses and personal financial goals. By combining these elements, a person can create a simple monthly budget.

What does a flexible budget look like?

In its simplest form, the flex budget uses percentages of revenue for certain expenses, rather than the usual fixed numbers. ... Consequently, a more sophisticated format will also incorporate changes to many additional expenses when certain larger revenue changes occur, thereby accounting for step costs.