Share
Explore BrainMass

Flexible budget lends itself to cost-volume-profit analysis

Discuss how a flexible budget lends itself to cost-volume-profit analysis.

Solution Preview

Dear student,

Discuss how a flexible budget lends itself to cost-volume-profit analysis.

Definition:--A flexible budget is a budget that is a function of one or more levels of activity. Thus, the budget depends on one or more measures of activity volume rather than being fixed in amount.

Flexible budget is the budget which denotes the sales, fixed costs and variable costs for the different levels of production. Fixed costs are costs which remain constant in total for the different levels of utilization of present capacity. Example: rent of factory building. Fixed costs would change only if there is change in capacity by acquisition of additional fixed assets. Fixed cost per unit will increase or decrease if there is reduction or increase in the level of production. On the other hand, variable costs would change directly in proportion to the levels of production. Example: direct ...

Solution Summary

The expert discusses how a flexible budget lends itself to cost-volume-profit analysis.

$2.19