Characteristics Of Flexible Budget And Steps To Be Followed For Preparing A Flexible Budget

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Thursday, February 17, 2011

The important characteristics of flexible budget can be pointed as follows:

* Flexible budget covers a range of activities
* Flexible budget is easy to change according to variations of production and sales levels.
* Flexible budget facilitates performance measurement and evaluation.
* It takes into account the changes in the volume of activity.
* Flexible budget replaces a static budget for control.

Steps To Be Followed For Preparing A Flexible Budget:

* To decide the range of activities for which the budget is to be prepared.
* To determine the cost behavior i.e. fixed, variable or semi-variable.
* To select the activity level for preparing the budget.
* To prepare flexible budget at each selected levels.

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