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HONDA Manufacturing Company prepares master budget
HONDA Manufacturing Company prepares master budget. Flexible budget variances are the deviations of actual results from the ________.
Select one:
a. flexible budget amounts for the static level of activity
b. static budget amounts for the expected level of activity
c. flexible budget amounts for the achieved level of activity
d. static budget amounts for last year's level of activity
Expert Solution
Answer is c. Flexible budget amounts for the achieved level of activity
A flexible budget variance is the difference between actual results and flexible budget for the achieved level of activity. For example if Static budget is 500 units and actual results are 450 units flexible budget variance is the variance between actual results and flexible budget for 450 units. A Flexible budget helps in meaningful comparison of actual results with same achieved level of activity. Hence flexible budget performance report is of utmost importance in performance management in an organisation to achieve targets.
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