Flexible Budget
A
flexible budget consists of a series of budgets for different level of
activity. Therefore, it varies with the level of activity attained. According
to CIMA, London, A Flexible Budget is, ‘a budget designed to change in
accordance with level of activity attained’. It is prepared by taking into
account the fixed and variable elements of cost. This budget is more suitable
when the forecasting of demand is uncertain.
Points to be remembered while
preparing a flexible budget
1.
Cost has to be
classified into fixed and variable cost.
2.
Total fixed cost
remains constant at any level of activity.
3.
Total Variable
cost varies in the same proportion at which the level of activity varies.
4.
Fixed and
variable portion of Semi-variable cost is to be segregated.