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Budgeting allows for better performance evaluation by using a flex budget model that accounts for actual business volumes. As the budgeted business volumes change, the budget automatically changes in the right proportion. Expenses are reflected in hours and dollars per unit rather than percentages, which makes them more accurateimproves their accuracy.
In addition, the flexible budgeting process provides you with a quantitative plan that projects revenues and costs for varying levels of activity. It helps you project and evaluate performance because it compares actual revenue and expenses with budgeted data, based on actual volumes. The flex budget also improves your 30-, 60-, and 90-day forecasts by accurately reflecting the impact of volume or rate revisions.
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