Some managements flex a budget linearly when wishing to make the budgeted volume and actual volume production more comparable. The basis for flexing can be either labour-hours or machine hours.

Required:
1 Discuss why flexing a budget linearly on the basis of either labour-hours or machine-hours may not be an appropriate basis. (9 marks)
2 Discuss how flexing a budget on a labour- or machine-hours basis may reduce effective cost control. (5 marks)
3 Discuss an alternative method of budgeting which might increase the relevance of the budget and improve effective cost control.