Skip to main content

What is Flexible budget explain it with example.

Explanation of Flexible budget with example? 

 Performance evaluation in budgeting is sometimes difficult when actual activity is different from the activity which is originally budgeted.so in order to measure these differences, flexible budget is used and implemented.

Definition=

Flexible budget can be defined as the calculation in which original budget  and actual budget is compared with each other in order to find out changes in original and actual budget. these differences are known as variances which shows the variations between these budgets

These variances have two types
(i) favorable
(ii) unfavorable

for example if original budget exceeds actual budget it will be unfavorable condition. and if actual budget lower than original budget then its favorable condition .
The favorable and unfavorable conditions both depends upon the activities and costs of items and services.Favorable condition is denoted with F and Unfavorable condition is denoted with U.

With the help of flexible budget variances financial experts makes decision in order to avoid future losses for the companies.because variances shows both the favorable and unfavorable conditions.

 Example of Flexible Budgeting is given below :

                                                                       Flexible Budget

Original budget
Actual budget
Variances
Units Activity
20,000
16,000
4,000 U
Variable costs



Indirect. Labor
50,000
42,000
8,000 F
Indirect. Material
35,000
32,000
3,000 F
Power
8,000
6,000
2,000 F
Fixed costs



Depreciation
25,000
25,000
0
Insurance
2,000
2,000
0
Total overhead costs
1,40,000
1,23,000
17,000
Labels:

Comments

Post a Comment

Popular posts from this blog

What are the Crosby’s 14 Steps Work.

The 14 Steps of Crosby are following. 1. Management Commitment= It is necessary to consistently produce quality products and services at the optimum price. This commitment must also be transparent to all employees for the prevention of defects in all the operating departments. 2. Improved Quality= Search for team members who will model quality improvement commitment, every function of an operation must contributes to defect levels, every function must participate in the quality improvement effort . The quality improvement team should be able to effectively commit themselves to improvement of quality. 3. Measuring the Quality= Firstly you have to know exactly where your products and services lie when it comes to conforming to requirements. Thus, the third step on Crosby's list is to measure quality. Determine where there is room for improvement and where potential for improvement exists. 4. Cost of Quality= Explain how the cost of quality figures into the overal...
1 comment
Read more

Discuss national income and Gross domestic product effect on national income.

Discuss national income and Gross domestic product effect on national income. Before we start to explain let’s take a look on closed and open economy In a closed economy, all output is sold domestically, and expenditure is divided into three components: consumption, investment, and government purchases. Y = C + I + G In this equation Y is the total output, C is the total consumption, I is the total investment and G is the total government expenditure. In an open economy, some output is sold domestically and some are exported abroad.                                                                   Y = C + I + G + NX In the above equation each word stands for is following: Consumption (C) Investment (I) Government Purchases (G) Net Exports (NX) Consumption : The spending by households on goods and services, with the exc...
Post a Comment
Read more

Define Parametric and Non parametric test. When these tests are used? Also define their sub types along with examples

Explanation: Parametric tests = It is the Procedure of hypothesis which explains that the variables of interest are measured on at least an interval scale. It is parameters defining properties of the population distribution from which one's data are drawn, Uses of Parametric Tests 1: uses in skewed and non-normal distributions=Parametric tests can be used with continuous data that are non-normal if you satisfy these sample size guidelines. For example sample t test (each group should be greater than 15) and in ANOVA (if you have 10 -12 groups then each group should be greater than 20). 2: uses for when spread of each group is different= For nonparametric tests data for all groups must have the same spread (dispersion). If your groups have a different spread, the nonparametric tests might not provide valid results. In parametric tests you’re good to go even when the groups have different spreads. 3: uses as a Power=Parametric tests usually have more statistical power tha...
Post a Comment
Read more