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Flexible Budgets and Strategic Planning

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Discuss the key advantages and disadvantages of using a static, zero-based or flexible budget.

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Solution Summary

Discuss the key advantages and disadvantages of using a static, zero-based or flexible budget.

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STATIC BUDGETS
Generally speaking the static budget is the first budget created by the firm for the period. It bases its forecast on the level of sales that was predicted before the start of the accounting period. It is where the planning begins.

Advantage of the Static Budget:
1. It projects income at the level of output desired by the firm.

Disadvantage of the Static Budget:
1. It is not a very good evaluation tool. It is not the best tool for comparing actual performance ...

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