| 1. Level of activity | It is based on only one level of budget activity. | It is based on different levels of budget activity. |
| 2. Flexibility | It is fixed and does not change with the actual volume of output achieved. | It is flexible and changes with the actual volume of output achieved. |
| 3. Nature | It is based on unrealistic assumptions. | It is based on realistic assumptions. |
| 4. Condition | It assumes that the working conditions always remain fixed. | It assumes that the working conditions change according to their variability. |
| 5. Cost classification | There is no provision of cost classification. | There is provision of cost classification i.e. variable, fixed and semi-variable. |
| 6. Cost control | It has limited application and is ineffective as a tool for cost control. | It has more applications and can be used as a tool for effective cost control. |