Explain the Difference Between a Static Budget and a Flexible

question 23

Essay

Explain the difference between a static budget and a flexible budget. Explain what is meant by a static budget variance and a flexible budget variance.

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Definitions:

Average Accounting Return

A financial ratio that reflects the average net income that a project or investment generates compared to its initial cost or average investment.

Arbitrary Value

An arbitrary value is a value assigned based on discretion or judgment rather than from an objective calculation or measurement.

Project Measurement

The process of quantifying the performance and progress of a project against predefined benchmarks.

Internal Rate of Return

A financial metric used to evaluate the profitability of potential investments, representing the annual return rate that makes the net present value of cash flows from a potential investment equal to zero.