We want a flexible budget because costs are difficult to predict. We need the flexibility to change budgeted costs as input prices change. Does a flexible budget serve this purpose? Explain. Discuss the role of understanding cost behavior and cost-driver activities for flexible budgeting.
No, a flexible budget does not give you the flexibility to update pricing after the initial budget is crafted. A flexible budget permits you to adjust the initial (static) budget for actual activity (versus planned activity) so that you can compare actual spending to what you "should have spent" given the activity levels you experienced (rather than what you thought you would experience).
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