Question

When would it make sense to use a flexible budget as compared to a forecast budget?

Answer 1

Answer:Flexible budget and forecast budget differ in some ways but mainly because each produces different results.A flexible budget recognizes and incorporate costs in behavioral patterns. A budget defines where the business would like to be and a forecast actually states where thebusiness is going. A flexible budget achieves its results by adjusting targeted levels of costs according to how the volume changes. A forecast budget does not differentiate from the allowed budget. A flexible budget would best be used in cases where there are expensesthat vary when small changes in volume occur. Supplies would be an example because they vary naturally in prices. A forecast budget does not change the forecast volume, revenue, expense, and profits for the whole year versus the flexible budget where volumes and values are change for the year. A flexible budget allows for adjustments and changes in projected expenses if the volume of sales greatly changes. Thus the term flexible because it is constantly changing, this method would work best in a new company where theyare still trying to figure out what services works best and bring in money.