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Budgetary control

This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.

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September 6, 2017 at 3:31 pm #406045
emily1021
Member
- Topics: 9
- Replies: 4
Fixed budget is not helpful as cost control technique because:
A. It remains statics.
B. The actual output and sales may be significantly different from the budgeted level.
Answer is B.
I don’t understand why the answer not A is B.
September 6, 2017 at 4:42 pm #406069
John Moffat
Keymaster
- Topics: 57
- Replies: 54747
There is no requirement for the fixed budget to remain static – many companies update it during the year.
However when using budgets for control (to compare actual with budget) then we need to flex the budget – there is no point in comparing with the fixed budget.
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