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I am looking for the advantages and disadvantages of flexed budget. Can you tell me some?
I have written a few of them below. can you tell me they are correct?
Advantages:
1) It is used for variance analysis
2) With flexible budgeting, managers will be able to plan and forecast more accurately.
3) Performance management can be more meaningful
4) Better enables businesses to pursue new opportunities and mitigate risk
5) Accounts for unexpected expensesDisadvantages:
1) High level of indirect costs, making it difficult to separate fixed and variable costs from total indirect costs
2) Predictions have a shorter lifespan — months rather than quartersThank you 🙂
Could you please correct me about the difference b/w flexible & flexed budgets?
Flexible budget is made for different activity levels because we do not know what activity levels would be in actual at the year-end so due to this obscurity we make several fixed budgets with different activity levels known as flexible budget.
Flexed budget is made for the actual activity level because we compare the actual results with the flexed because both the production volume both in actual and flexed are the same and they can be compared with each other to see whether there is any difference in the results that are known as variances.
So we need to always compare with the same activity levels between original fixed budget and actual result of 12,000 units which would be done by flexed budget.
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