Flexible Budgeting Flashcards
1
Q
What is sensitivity analysis?
A
A tool used to analyse how the different values of a set of independent variables affect a specific dependant variable under certain conditions.
2
Q
What is a flexible budget?
A
A flexible budget is a summary of revenues and costs across a range of different activity levels. It helps you know when to change certain costs
3
Q
Why is a flexible budget prepared?
A
A flexible budget is prepared to show the different costs at different production levels, up to and including, maximum capacity. It is also prepared to:
Help control costs
Help plan production levels
Allow variances to be identified and for corrective action to be taken where necessary
To compare actual costs with budgeted costs
