plant capacity, etc. The main characteristic of flexible budget is that it shows the expenditure appropriate to various levels of output. If the volume changes the expenditure appropriate to it can be established from the flexible budget for comparison with actual expenditure as a means of control. It provides a logical comparison of budget alowances with actual cost. When flexible budget is prepared actual costat actual activity is compared with budgeted cost at actual activity Le two things to a like base. For preparation of flexible budget, items at cost have to be analysed individually to determine how different items of cost behave to change in volume. Therefore, in-depth cost analysis and cost identificaton is required for preparation of flexible budget. Following are the striking features of flexible budgets: () They are prepared for a range of activity instead of a single level. (W) They provide a very dynamic basis for comparison because they are automatically geared to changes in volume 139) They provide a tailor-made budget for a particular volume, ( These are based upon adequate knowledge of cost behaviour pattern Flexible budgets may be prepared in the following method: Tabular method or multi-activity method 0) Formula method or ratio method and ) Graphic method Illustration 3 Following information is avalable from the records of Jay Ltd. for the year end 31st March 2014 dlakhs) Fixed Expenses Wages and salaries 9.5 Rentrates and taxes 6.6 Depreciation 7.4 Sundry administrative expenses 6.5 Semi-Variable Expenses (at 50% of capachy Maintenance and repairs 3.5 Indirect labour Sales department salaries 3.8 Sundry administrative expenses Variable Expenses (at 50% of capacity Materials Labour 20.4 Other expenses 79 98.0 Assuming that the fixed expenses remain constant for all levels of production, semi-varlable expenses remain constant between 45% and 65% of capacity increasing by 10% between 65% and 80% and by 20% between 80% and 100% Sales at various levels are: lakhs) 50% capacity 100 60% 120 75% 90% 100% 200 Prepare a flexible budget for the year and forecast the piotits at 60%, 75%, 90% and 100% of capacity. 7.9 2.8 21.7 150 180