It is a budget known as constant budget, never registers the changes in the preparation of a budget, being prepared for irrespective level of output or production. This budget is mainly meant for the fixed overheads of the firm which are constant in volume irrespective level of production. The ultimate utility of the budget is to control the cost as a cost controlling measure, but the fixed budget is meaningless in having comparison with the actual performance.
Flexible budget is prepared for any level of production as an estimate of statement of all expenses i-e the expenses are classified into three categories viz variable, semi-variable and fixed expenses. The structure of the budget for any output is only to the tune of the actual performance achieved. This is the budget facilitates not only to have comparison in between various levels of production but also to identify the level of lowest production cost.
Utilities of the flexible budget:
Draft a flexible budget for overhead expenses on the basis of following information and determine the overhead rates at 70% 80% and 90% plant capacity.
The expenses for budgeted production of 10,000 units in a factory are furnished below
Prepare a budget for production of
Assume that administration expenses are fixed for all level of production
From the following information relating to 1963 and conditions expected to prevail in 1964, prepare a budget for 1964:
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