ACCA MA Syllabus D. Budgeting - Fixed Budgets - Notes ^{2 / 3}

prepared normally prior to the start of an accounting period is called the fixed budget

It is not changed in response to changes in activity or costs/revenues.

It is produced for a single level of activity, i.e. based on estimated production.

Comparison of a fixed budget with the actual results for a different level of activity is of little use for budgetary control purposes.

This is because we will not really be comparing like with like.

lies in its use at the planning stage.

It is useful for controlling any fixed cost, and particularly non-production fixed costs
such as advertising, because such costs should be unaffected by changes in activity level.