Flexible and fixed budgets

Question

Give a brief contrast between flexible and fixed budgets?

Answer 1

1. A fixed budget is recognized for an exact level of activity while flexible budget is made for different levels of activity.

2. Fixed budget cannot be altered after the period begins, while a flexible budget can be altered after the period begins.

3. Fixed budget is more appropriate for fixed expenditures while flexible budget takes both fixed in addition to variable expenditures in account.

4. Fixed budget consists of only fixed costs, while a flexible budget consists of semi-variable costs, fixed costs and variable costs.

5. Fixed budget is mostly employed in preparation stage while flexible budget is employed in scheming stage.