Flexing Budgets 3 / 4

Budgets

A flexible budget is a budget which, by recognising different cost behaviour patterns, is designed to change as volume of activity changes.

A flexed budget is a budget prepared to show the revenues, costs and profits that should have been expected from the actual level of production and sales.

Budgetary control involves drawing up budgets for the areas of responsibility for individual managers and of regularly comparing actual results against expected results. The differences between actual results and expected results are called variances and these are used to provide a guideline for control action by individual managers.

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