A flexible budget is a budget that adjusts to the activity or volume levels of a company. Unlike a static budget, which does not change from the amounts established when the budget was created, a flexible budget continuously “flexes” with a business’s variations in costs.
What are the major objectives of flexible budget?
The flexible budget can be used for the determination of budgeted sales, costs, and profits at different activity levels. It helps the management to decide the level of output to be produced in order to generate profits for the business based on budgeted cost at different activity levels and budgeted sales.
What is a flexible budget quizlet?
What is a flexible budget? A report showing estimates of what revenues and costs should have been, given the actual level of activity for the period. -takes into account how changes in activity affect costs.
Why can flexible budgeting cause problems?
some of the disadvantages of a flexible budget, which include: It can be time-consuming to figure out just how variant those variable costs might be. As a result, a flexible budget may include only a few variable cost formulas, which diminishes the value of creating a flexible budget in the first place.
When should flexible budget be used?
Flexible budgeting can be used to more easily update a budget for which revenue or other activity figures have not yet been finalized. Under this approach, managers give their approval for all fixed expenses, as well as variable expenses as a proportion of revenues or other activity measures.
What do flexible budgets help measure?
Which is the best definition of a flexible budget?
B. a budget that ignores inflation. C. used only for fixed costs. D. used when the mix of products does not change. A. a budget for a single level of activity. 29. Which of the following comparisons best isolates the impact that changes in operating efficiency have on performance?
How to improve performance in a flexible budget?
A. remove items from performance reports that are not controllable by managers. B. permit managers to reduce the number of unfavorable variances that are reported. C. update the static planning budget to reflect the actual level of activity of the period.
What is the definition of static planning budget?
A static planning budget is: A. a budget for a single level of activity. B. a budget that ignores inflation. C. used only for fixed costs. D. used when the mix of products does not change. A. a budget for a single level of activity.
When to compare monthly operating results to static budget?
Hoppy Corporation compares monthly operating results to a static budget prepared at the beginning of the month. When the actual level of activity is less than budgeted, which of the following would be true? A. Variable costs would show favorable variances. B. Variable costs would show unfavorable variances.
