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FLEXIBLE BUDGET YOU CAN DO RIVISION BETWEEN LINES BUT IN STATIC YOU CANT
Flexible budget prepared based on the acual quantative output to determine the price variances from the static budget.
Static budget is set one time for the full year and compared to the actual result till the end of period (say year)
Flexible budget is the one which consider the changing in budget according to the actual results say after each quarter next quarter can be adjusted according to the actual results .
Following are the main differences between static and flexible budget:
1. Nature
A static budget does not change with the actual volume of the output achieved. A flexible budget is designed to change appropriately with the level of activity attained.
2. Scope
A static budget cannot ascertain costs correctly in case of any change in circumstances. Flexible budget can easily ascertain costs in different levels of activities.
3. Determination Of Cost
Static budget is prepared under the assumption that all conditions will remain unaltered. Flexible budget is prepared at different levels of activities considering the possible changes in the operational aspect of a business.
4. Assumptions
Static budget has a limited application and is ineffective as a tool for cost control. Flexible budget has a wide application as an effective tool for cost control.
5. Pre-requisites
Static budget is prepared without classifying the costs according to their variable nature. Flexible budget is prepared by classifying the costs according to their variable nature.
