Learning Materials For Accounting, Management , Finance And Economics.

Thursday, February 17, 2011

Importance Or Advantages Of Flexible Budget

The usefulness or importance of a flexible budget depends very much on the accuracy of the classification of expenses into fixed, semi-fixed and variable ones. The important advantages of flexible budget are as follows:

* A flexible budget enables the management to analyze the deviation of actual output from expected output.

* The management can compare actual costs at the actual volume with the budgeted costs at the actual volume.

* The flexible budget provides a correct basis for comparison between actual and expected costs for an actual activity.

* Flexible budget helps to fulfill the objectives of cost control as it shows where the actual performance deviated from the planned performance.