The basic difference between a master budget and a flexible budget is that:

(1) A flexible budget considers only variable costs, but a master budget considers all costs.

(2) A flexible budget allows management latitude in meeting goals, whereas a master budget is based on a fixed standard.

(3) A master budget is for an entire production facility, but a flexible budget is applicable to single departments only.

(4) A master budget is based on a predicted level of activity, and a flexible budget is based on the actual level of activity.

(CPA adapted)