Concept explainers
a
Introduction:
The static budget can be denoted as a fixed budget as it is prepared in advance where the management predetermined the future possible performance level along with its related earnings and expenses.
To prepare: The static budget report.
b
Introduction:
In a flexible budget, the volume or activity level changes because it includes the actual level of activity. The flexible budget can be changed according to the actual activity level of the company. It facilitates in comparison of actual performance with budgeted one at the same activity level. Due to this flexible budget, the report is considered to be more reliable than a static budget.
To prepare: preparation of the flexible budget and performance analysis.
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