Modified Flexible Budgets Homework Help

Modified Flexible Budgets

From the preceding discussion it should be clear that flexible budget as a tool of planning and control are superior to fixed budgets. The major weaknesses of state budgets are their inability to: (i) Disclose the potential variability of various estimates used in preparing the budget and (ii) Indicate the range within which costs can be expected to fall. They are not useful, therefore, in an uncertain and unpredictable environment. Flexible budgets are better in that they present estimates of costs at different level/volume of activity. But their one limitation is that they do not explicitly consider the relative probability that any particular volume or cost will be achieved ? This limitation can he overcome by using a modified flexible budget, which will include columns for different levels of estimates-most likely and optimize. The hypothetical modified flexible budget is shown In Table

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Modified Flexible Budgets

Modified Flexible Budgets

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