Rarely will the assumptions of the master budget be completely accurate. As a result, organizations use a modified budget called a flexible budget. A flexible budget is a revised master budget based on the actual activity levels. The flexible budget represents what costs should be – based on the actual levels of sales/activity. In this unit, the text assumes beginning and ending finished goods inventory are the same and, therefore, the number of units produced and sold will be the same. Read the Chapter
10 Introduction, and then click "Next Section" to read Section 10.1. As you read, follow along with how Jerry's Ice Cream handles a doubling of expected sales – sweet news!