Crispety-I think that a static budget vs. a flexible budget are different in many ways, but both of these types of budgets need to be taken into consideration in order to pay fixed expenses and have additional funds for unexpected expenses.
The fixed expenses are known expenditures that we should try to reduce somewhat year after year. This allows more flexibility in case we need to spend extra money.
Sometimes we may have an activity based flexible budget that we would like to add in order to provide more customer outings in order to increase sales revenue.
While this expenditure can be measured it is something new that we had to add to the budget in order to retain the customers that we have and expand our customer base to add new ones.
All of these budgets have to coincide with the gross margin of the company which is the profitability of the company.
If the company is not profitable, then they have to reduce their expenses and maybe eliminate the entire flexible budget until they get their expenses under control. This is the main difference between the fixed and flexible budgets.