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’s a flexible budget?
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 is the formula for the flexible budget?
To compute the value of the flexible budget, multiply the variable cost per unit by the actual production volume. Here, the figure indicates that the variable costs of producing 125,000 should total $162,500 (125,000 units x $1.30).
The purpose of a flexible budget is to: (Points : 2) allow management some latitude in meeting goals. eliminate fluctuations in production reports by ignoring variable costs. compare actual and budgeted results at virtually any level of activity. reduce the time to prepare the annual budget.
What’s the difference between a flexible budget and a variance?
Definition of Flexible Budget and Flexible Budget Variance. First, a flexible budget is a budget in which some amounts will increase or decrease when the level of activity changes. A flexible budget variance is the difference between 1) an actual amount, and 2) the amount allowed by the flexible budget.
Can a flexible budget be preloaded into accounting software?
A flexible budget cannot be preloaded into the accounting software for comparison to the financial statements. Instead, the accountant must wait until a financial reporting period has been completed, then input revenue and other activity measures into the budget model, extract the results from the model, and load them into the accounting software.
How does flexible budget work for Yoga Inc?
When flexible budgets are adjusted to a series of possible activity levels, the resulting data helps anticipate the effect of changes in activity levels on revenues and costs thus allowing management to make useful adjustments to plans. Following is the static budget and actual results of Yoga Inc. for the month of April 20X4.
