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A tutorial question and its suggested solution was: Q. Describe the basic concept of flexing the budget. Illustrate the concept with a simple example. Solution:
A tutorial question and its suggested solution was: Q. Describe the basic concept of flexing the budget. Illustrate the concept with a simple example. Solution: A flexible budget seeks to overcome the problem of differing levels of activity between budget and actual output volumes. A new 'flexed budget is prepared at the actual output level to be used for variance analysis purposes. A simple example could be the budget given to you to grade exam papers of 30 minutes per paper for 10 students = 300 minutes. If only 8 students sit the exam your budget will be flexed to 240 minutes (8 x 30).) Required: In your own words, explain the meaning of 'flexing the budget and why it is necessary. 82 (6 marks) [Type your answer here]
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