Difference Between Static Budget And Flexible Budget
The main dissimilarities or difference between static and flexible budget can be pointed out as follows:
1. Meaning
Static Budget: A traditional form of budget which does not change as per the change in the level of activity.
Flexible Budget: A modern form of budget that changes as per the change in activity levels.
2. Variability
Static Budget: It does not recognizes the variability of costs.
Flexible Budget: It recognizes the cost variability.
3. Nature
Static Budget: It is static or fixed in nature
Flexible Budget: It is dynamic or variable in nature
4. Level Of Activity
Static Budget: It assumes only one activity level
Flexible Budget: It assumes multiple or various levels of activity.
5. Modification
Static Budget: Because of static nature it cannot be modified or changed.
Flexible Budget: Because of flexible nature it can be easily changed or modified
6. Estimation
Static Budget: Based upon past experience and assumptions
Flexible Budget: Based on scientific and practical analysis
7. Cost Control
Static Budget: Cannot be used for cost controlling purpose
Flexible Budget: Applicable and effective for cost control
Also Read
Also Read
8. Cost Ascertainment
Static Budget: Ascertainment of cost in changing situation is impossible
Flexible Budget: Cost ascertainment is possible in every situation
9. Application
Static Budget: Limited
Flexible Budget: Wide
Static Budget Vs Flexible Budget (Comparison Chart)
I hope this post is helpful to understand the difference between static budget and flexible budget and to make comparison between them.
Static Budget Vs Flexible Budget (Comparison Chart)
Basis For Difference
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Static Budget
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Flexible Budget
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Introduction
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Type of budget that does not change according to the change in activity level
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Type of budget that changes according to the change in activity level
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Cost Variability
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Does not recognize
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Recognizes
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Nature
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Fixed
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Dynamic
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Activity Level
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Only one level of activity
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Various levels of activity
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Modification
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Impossible
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Possible
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Based On
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Assumption and experience
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Practical analysis
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Useful For Cost Control
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No
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Yes
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Ascertainment Of Cost In Changing Situation
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Impossible
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Possible
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Application
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Limited
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Wider
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I hope this post is helpful to understand the difference between static budget and flexible budget and to make comparison between them.
