What is the flexible budget?

A flexible budget adjusts based on changes in actual revenue or other activities. The result is a budget that is fairly closely aligned with actual results. This approach varies from the more common static budget, which contains nothing but fixed expense amounts that do not vary with actual revenue levels.

Whats is 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 flexible budget and its importance?

Flexible, rolling budgets empower entrepreneurs to cope with change. This nimble planning process lets you adjust spending throughout the year, benefits include less overspending, more opportunities and speedier responses to changing market and business conditions.

What is flexed budget with example?

A flexible budget created each period allows for a comparison of apples to apples because it will calculate budgeted costs based on the actual sales activity. For example, (Figure) shows a static quarterly budget for 1,500 trainers sold by Big Bad Bikes. The budget will change if there are more or fewer units sold.

What is flexible budget Mcq?

A budget that will be changed at the end of every month in order to reflect the actual costs of a department.

What are the two meanings of a flexible budget?

A flexible budget is a budget that adjusts or flexes with changes in volume or activity. The flexible budget is more sophisticated and useful than a static budget. (The static budget amounts do not change. They remain unchanged from the amounts established at the time that the static budget was prepared and approved.)

What is flexible budget in cost and management accounting?

Definition: A flexible budget, also called a variable budget, is financial plan of estimated revenues and expenses based on the current actual amount of output. … Management often uses flexible budgets before a period to predict both a best case and worse case scenario for the upcoming accounting period.

Why is flexible budget better?

The greatest advantage that a flexible budget has over a static budget is its adaptability. In the real world, change is real and it is constant. A flexible budget can handle that reality and better position a company for the challenges of the marketplace. Fixed versus variable expenses in a flexible and static budget.

Which is the features of flexible budget?

A flexible budget is easy to change according to variations of production and sales levels. Flexible budget facilitates performance measurement and evaluation. It takes into account the changes in the volume of activity. Flexible budget replaces a static budget for control.

How a flexible budget is prepared?

Preparation of a Flexible Budget. The flexible budget uses the same selling price and cost assumptions as the original budget. Variable and fixed costs do not change categories. The variable amounts are recalculated using the actual level of activity, which in the case of the income statement is sales units.

How do you calculate flexed 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).

What is the difference between flexible budget and flexed budget?

Ensure you know the difference between these terms. Flexible budgeting happens at the beginning of a budgeting period—revenue, costs, and profit are forecast across a range of activity levels. With this information, a flexed budget can then be created at the end of the budget period based on the actual activity level.

What is difference between cash budget and flexible budget?

Cash budget is a budget or forecast which predicts the cash position of an organization in terms of receipts and payments. … Flexible budget is a budget in which the expenses adjust to the level of sales or output – in contrast, a fixed budget is one which does not vary with the level of sales or output.

What is static budgeting?

A static budget is a type of budget that incorporates anticipated values about inputs and outputs that are conceived before the period in question begins. … However, when compared to the actual results that are received after the fact, the numbers from static budgets can be quite different from the actual results.

Which of the following is a difference between a static budget and a flexible budget?

the static budget contains only fixed costs, while the flexible budget contains only variable costs. … the flexible budget is prepared for a single level of activity, while a static budget is adjusted for different activity levels.

What is fixed budget?

A fixed budget is a financial plan that is not modified for variations in actual activity. It is the most commonly-used type of budget, because it is easier to construct than a flexible budget.

What does flexible budget variance mean?

What is a Flexible Budget Variance? A flexible budget variance is a calculated difference between the planned budget and the actual results. In the example above, the company has set a target of 85% production capacity. The budgeted or planned sales volume of 212,500 units yields a $740,625 profit.

Who uses flexible budgets?

A flexible budget works for people who work on commission or who have expenses that vary widely from month to month. The important aspect of using a flexible budget is to spend equal to or less than the income each month.

How do you flex a budget in Excel?

flexed budgets and variances – YouTube

What is a flexible budget performance report?

A flexible budget performance report is used to compare actual results for a period to the budgeted results generated by a flexible budget. … This approach results in budgeted expenses that are significantly more relevant to the actual performance that an organization experiences.

How do you calculate flex budget variance?

For example, a flexible budget model is designed where the price per unit is expected to be $100. In the most recent month, 800 units are sold and the actual price per unit sold is $102. This means there is a favorable flexible budget variance related to revenue of $1,600 (calculated as 800 units x $2 per unit).

What are the types of budget?

Different types of budgets

• Master budget. A master budget is an aggregation of lower-level budgets created by the different functional areas in an organization. …
• Operating budget. …
• Cash budget. …
• Financial budget. …
• Labor budget. …
• Static budget.

What are the 3 types of budgets?

According to the government, the budget is of three types:

• Balanced budget.
• Surplus budget.
• Deficit budget.

What is a flexible budget How does it vary from a fixed budget?

Key Differences Between Fixed and Flexible Budget

A fixed budget is a budget that doesn’t change due to any change in activity level or output level. The flexible budget is a budget that changes as per the activity level or production of units. The fixed budget is static and doesn’t change at all.

What are the two main types of budget?

There are two major types of budgets: static budgets and flexible budgets. A static budget remains unchanged over the life of the budget. Regardless of changes that occur during the budgeting period, all accounts and figures originally calculated remain the same.