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Fixed and Flexible Budget

Compare bottom-line financial results of using a fixed budget and a flexible budget if volumes (a) increase by 10% or (b) decrease by 10%.

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The bottom line financial results will vary considerably if we use a fixed budget rather than a flexible budget.

(a) If the volume increased by 10%, then the fixed budget would show a negative variance. This is because all there will be an increase in variable costs associated ...

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The solution explains the concepts briefly and concisely. The answer is to the point and can easily be understood by a student with a basic understanding of the topic. Overall, an excellent response.