Static Vs. Flexible Budgets
There are two major types of budgets:
1.Static budgets and
2.Flexible budgets.
A static budget remains unchanged over the life of the budget. Regardless of changes that occur during the budgeting period, all accounts and figures originally calculated remain the same.
A flexible budget has a relational value to certain variables. The dollar amounts listed on a flexible budget change based on sales levels, production levels or other external economic factors.
Both types of budgets are useful to management. A static budget evaluates the effectiveness of the original budgeting process, while a flexible budget provides deeper insight into business operations.
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