Flexible Budget

Abstract

The ever-changing business environment and the shorter product life cycle impose the need to develop new forecasting models and replace static budgets with flexible budgets. Thus, the analysis of deviations from budgeted costs becomes a desideratum of any entity. Flexible budgeting is based on the analysis of expenditure behavior and involves setting budgeted expenditure levels for different activity levels to monitor activity. The chapter highlights the importance of flexible budgeting of expenditures. It presents a comparison between static budgets and flexible budgets, the methodology for preparing flexible budgets, exemplifying how to prepare them for more predictable levels of activity, and budgetary control based on flexible budgets. The research is addressed to the academic environment and the practitioners concerned with the enterprise's management through the budget system, having as motivation the desire to satisfy the need for information both in higher economic education and in economic practice.