Question

Identify the main purpose of a flexible budget for managers.

Short answer

Flexible budgets enable the managers to control their costs and are used as a planning tool.

Step-by-step solution

Meaning of Flexible Budget

As the name suggests, a flexible budget adjusts with the changes in activity levels. In this budget, actual revenues are entered when an accounting period completes, and then the same is compared to the actual expenses incurred.

Purpose of flexible budget

The flexible budgets facilitate the managers to make plans by evaluating the financial outcomes at different activity levels.

This budget enables the managers to control the costs more effectively because flexible budgets are not based on budgeted figures.