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Fixed Budget Flexible Budget Fixed budget is inflexible and does not change with the actual volume of output achieved. Flexible budget can be suitably recasted quickly according to level of activity attained. 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. Coasts are classified according to the nature of their variability. Comparison of actual and budgeted performance cannot be done correctly if the volume of output differs. Comparisons are realistic as the changed plan figures are placed against actual ones. It is difficult o forecast accurately the resultsin it. Flexible budget clearly shows the impact of various expenses on the operational aspects of the business. Only one budget at a fixed level of activity is prepared due to an unrealistic expectation on the part of the management Series of budgets are prepared at different level of activities. Fixed budget has a limited application and is inefficient as a tool for cost control. 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.

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What is the difference between a fixed budget and a flexible budget?

is a plan for a single level of production, whereas a flexible budget can be converted to any level of production.


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What variance is the difference between the actual sales and the flexible budget sales?

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There is no difference between them.. Their difference only is how you understood about financial budget.. :)


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What is budget variance?

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