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Why a flexible budget is better than a static budget

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Question: Assume you have been assigned to a team responsible for using the flexible budget to assist in determining managers' bonuses. When you approach the production manager about some variances, he says, "I don't know why your team can't just use the budget we developed at the beginning of the year. It was based on last year's actual numbers which seems reasonable. I don't understand this 'flexible budget' stuff. When I compare my actual results with our beginning of the year budget I have beat the budget, so that should be sufficient. That will save us all a lot of time and effort." Explain to the production manager why a flexible budget is better than a static budget and its use in evaluating performance.

Reference no: EM132760103

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