Flexible budgeting builds the effect of changes in level of activity into the budget system.

Question

Quizplus · Accepted Answer

Flexible budgeting takes into account the changes in activity levels and adjusts the budget accordingly. This allows for better planning and forecasting, as the budget can adapt to varying levels of production or sales. It is a more realistic approach compared to rigid budgeting, where fixed targets are set regardless of changes in activity levels.

Flexible Budgeting Builds the Effect of Changes in Level of Activity