To adjust budgeted costs based on actual activity levels
To set fixed costs for the period
To eliminate variances in financial statements
A flexible budget adjusts budgeted costs based on actual activity levels, allowing for a more accurate comparison of performance.
Questions & Step-by-step Solutions
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Q
Q: What is the primary purpose of a flexible budget?
Solution: A flexible budget adjusts budgeted costs based on actual activity levels, allowing for a more accurate comparison of performance.
Steps: 4
Step 1: Understand what a budget is. A budget is a plan that shows how much money you expect to spend and earn.
Step 2: Learn about a flexible budget. A flexible budget changes based on how much activity actually happens, like how many products you sell.
Step 3: Know the primary purpose. The main goal of a flexible budget is to give a clearer picture of how well you are doing by comparing what you planned to spend with what you actually spent based on real activity levels.
Step 4: Realize the benefit. This helps businesses see if they are performing well or if they need to make changes.
