Which TWO of the following statements explain why a flexible budget can be more useful in control than a fixed budget?
1.The budget is designed to change as activity levels change
2.Direct cost variances are more meaningful
3.Action can be taken to improve adverse variances
4.The budget gives the actual level of activity
Hello, I am confused with this question.
I chose 1&4. However the answer is 2&3
Could anyone please help?
Thank you in advance.
Ask the Tutor ACCA MA
Flexible budget Vs Fixed budget
3y ago#1The question asks about control, and for control we look at the variances.
When calculating variances we compare the actual expenditure with the flexed budget expenditure (not with the original fixed budget expenditure).
Sign into reply to this topic.