Question

Why companies should have a flexible budget.

Please answer in word format and in 350 words.

Thanks

Answer 1

Budgeting is how a business plans for future production cycles. Flexible budget allows a business to evaluate its performance. A flexible budget is a budget with figures that are based on actual output. It's then compared to a company's static budget to get variances(differences) between what level of spending was expected and what actually occured. Companies should have a flexible budget , just because if we are running our own business, it's not hard to implement a flexible budgeet based on the business numbers. you don't need to be accountant. The math is simple and it's typically worth the effort in the end. After all, it's hard to know how you can make your company better and more cost efficient when you don't even know where you're missing the mark. Flexible budget are one way, companies deal with different levels of activity. A flexible budget provides budgeted data for different levels of activity. The flexible budget uses the same selling price and cost assumptions as the original budget. so, the companies should have a flexible for smooth functioning of business.