Flexible BudgetsA budget that is more useful because it is adaptable to change is called a flexible budget. Flexible budgets can be prepared for each of the types of budgets included in the master budget.To develop the flexible budget, management must take the following four steps. Recognize the activity index and the appropriate variety of activity. The activity index includes the direct labor hours. Management brings to a close that the appropriate choice of direct labor hours monthly. Recognize the variable costs, and decide the financial plans variable costs per item of activity for each fee. There are three variable costs, which include indirect materials, indirect labor, and utilities. The changeable price per unit is established by dividing each sum budgeted charge by the direct labor hours used in organizing the master financial statement. Recognize the fixed costs, and establish the budgeted quantity for each price. There are three fixed costs, which include the following depreciation, supervision, and property taxes. Given that each business
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