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Differences between the static planning budget and the flexible budget show what should have happened because the actual level of activity differed from what had been planned.
Static Planning Budget
A budget prepared for a single level of activity, not adjusting for changes in volume or activity.
Flexible Budget
A financial tool that adjusts according to changes in the output or activity level, providing a more accurate comparison to actual results.
Actual Level
Represents the real, measured level of activity, production, or performance, as opposed to estimated or planned levels.
- Discern the contribution of activity level fluctuations to the variance analysis operation.
- Review the effect of live activity magnitudes on budgetary projections for costs and gains.
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Learning Objectives
- Discern the contribution of activity level fluctuations to the variance analysis operation.
- Review the effect of live activity magnitudes on budgetary projections for costs and gains.
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