Question

What is the difference between a static budget and a flexible budget? When is each used? explain

Answer 1

Static Budget	Flexible Budget
Static Budget also known as fixed budget are budget prepared by the management at a fixed level of output. For. Eg. The cost of a product if the output is 1000 units.	Flexible Budget on the other hand are budget prepared at varied level of outputs. For e.g For. E.g. The cost of a product if the output is 1000 , 1500, 2000 units respectively.
In static budget cost are not classified according to there variability i.e fixed, semi-variable. Variable.	In flexible budget, cost are classified according to there variability.
Non Classification of cost based on variability makes it redundant if actual output differs from Budgeted Output on which cost is prepared.	It does not happen in Flexible Budget.
Its assumption while preparation is that condition will remain static. i.e level of output will be the same.	It is designed such that it changes with the changing condition i.e if the level of output changes from 1000 to 1500 what shall be the budgeted cost can be determined to compare with actual.
If level of output is constant static budget is used.	If level of output changes flexible budget is used,