Page 17 - PM Integrated Workbook 2018-19

A revision of Management Accounting (MA) topics

1.4 Fixed, flexible and flexed budgets

1 Fixed budgets

 A fixed budget is prepared before the beginning of
a budget period for a single level of activity.

Fixed, flexible and
flexed budgets

2 Flexible budgets 3 Flexed budget
 A flexible budget is also prepared  A flexed budget is prepared at
before the beginning of a budget the end of the budget period.
period.
 It provides a more meaningful
 It is also prepared for a number of estimate of costs and revenues
levels of activity. and is based on the actual level

 It requires the analysis of costs of output.
between fixed and variable  As a result, the diversity and
elements. complexity of products has
increased.
 Not all production overheads
are driven by level of activity.

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