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The environment for business is very dynamic and competitive thus preparing a financial plan that can alter changes in the activity level depending on the circumstance is essential for the effective daily running of the business. A flexible budget majorly acts as a performance evaluation tool (Kimmel, Weygandt & Kieso (2005). For instance, it enables comparison of planned outcomes to actual results thus allows for measurement of variation. It also allows for modification of costs when the forecast sales volume and production go beyond or fail to meet expectations due to various uncontrollable factors. A flexible budget makes an evaluation of profits easier as it employs more points of alterations and briefer timelines as well as stated by Mattessich (2003).
Besides, a flexible budget indicates the deviation o.............
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