Fixed Budget | Definition | Features

Definition of fixed Budget

The Institute of Costs and Management Accounts (U.K) defines a fixed budget as

“Fixed budget are those that are drafted to remain the same regardless of the activity levels it actually attained.”

A fixed budget is prepared for single level of activity. The performance report is prepared by comparing data from actual operations. Fixed budget do not change when production level changes.

Features of Fixed budget

The following are the features of fixed budget

1. Fixed budget is rarely prepared and used. The reason is that the actual output is differing from the budgeted output. Hence, the management cannot exercise cost control.

2. The performance report does not contain useful information and misleading one.

3. If units are overlooked in the cost-to-cost comparison, accurate result is not available.

4. The performance report gives merely whether the actual costs are higher or lower than budgeted costs.

5. Fixed budget is limited by the costs and expenses which are affected by fluctuations in volume. This is a well known accepted fact.

6. There is no meaning of comparing one activity level with some other activity level. A fixed budget can be usefully employed when budgeted output is close to the actual output.

Leave a Reply

Recent Posts

Related pages

usefulness of price elasticity of demanddefine stock speculationaverage stock turnover periodtimekeeping in cost accountingadvantages and disadvantages of centralization in managementprofitability ratio interpretationlogistician meaningfiling classification systemslimitation of mbopromotor definitionsalesperson evaluationstock exchange dealingsdematerialization of sharesdefine senioritymbo appraisaldefine commercial billshow does a merger differ from an acquisitionintroduction of sole proprietorshipdurable consumer goods definitiondisadvantages of capitalist economic systemdifferent types of npapurchase return debit notedefine merchant bankingdefinition of urbanisationbond vs debenturememoranda meaningdefinition stratified samplingdishonored billexamples of cluster samplingmarginal cost and absorption costexecutory and executed contractsdefinition of socialism governmentmergers and acquisitions definitiondefinition of a cartelmeaning of irdameaning of labour turnoverpersonnel tamil meaningdifference between shares and debentures and bondswhen did rbi establishedconsumerism meaningexamples of variable overheadsgross profit ratio formulameaning of autocraticmanpower requirements definitionbenefits of cluster samplingfranchisor and franchisee meaningexamples of wholesalersmanagement diseconomiesadvantages and disadvantages of marketing strategymeaning of venture capitalistsecond schedule of rbiadvantages of decentralizationsundries accountingoverheads business definitiondefine paybackmanagement accounting marginal costingconvenience sampling definition statisticslifting the veil of incorporationwhat does gatt stand fordefine peril insuranceformula of operating ratiodefinition of non probability samplingintra defhuman blueprintswhat does mercantile meanhire purchasing and leasingadvantages of unrelated diversificationissue and allotment of shares differencecost allocation and apportionmenttrade payables ratiovoid and voidable contractdegree of total leverage calculatordemotion define