Q5RQ - Horngren'S Financial And Managerial Accounting

Question

Question: How is a flexible budget used?

Step-by-Step Solution

Answer

Answer

A flexible budget is used for preparing the flexible budget performance report. 

Step 1: Definition of Budgeting

Budgeting refers to a process through which business wants to achieve their business operation goals by estimating the level of activity of a business entity. It includes the estimation of revenue and expenses.  

Step 2: Use of Flexible Budget

The business entity prepares a flexible budget for the different level of activity that falls within the relevant range and is used as the basis for preparing the performance report for a flexible budget. It is also used for understanding the overall static budget