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A flexible budget is more useful for control because it
Afixes one target for the whole year
Brecasts figures for the actual level reached
Cremoves fixed costs from the report
Dis prepared only after the year ends
Answer & Solution
Correct answer: B. recasts figures for the actual level reached
1. Actual output rarely lands exactly on the budgeted level.
2. Comparing actual cost at one level against budget at another compares two different things.
3. A flexible budget recognises the difference between fixed, variable and semi variable cost.
4. That lets it be recast for the level actually reached, making the comparison fair.
5. A fixed budget offers no such recasting, which is its main limitation.
_Source: ICAI Cost and Management Accounting Ch15 'Budgets and Budgetary Control', section 15.7_
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