Flexible Budget Essay

What is a flexible budget?A flexible budget projects budget data for various levels of activity. The flexible budget is a series of dormant budgets at different levels of activity. The flexible budget recognizes that the budgetary process is more useful if it is adaptable to changed operation conditions. Flexible budgets can be prepared for apiece of the types of budgets include in the master budget, so dep arresting on your particular business you will have different budgets in your flexible budget. What are the steps to evolution a flexible budget?The flexible budget uses the master budget as the basis. To develop the flexible budge the following steps need to be taken 1)Identify the activity index and the relevant range of activity 2)Identify the variable costs, and check off the budgeted variable cost per unit of activity for each cost. 3)Identify the fixed costs, and determine the budgeted amount for each cost. 4)Prepare the budget for selected increments of activity within the relevant range. What information is found on a flexible budget report?Flexible budget reports are a type of internal report. The budget report consists of two sections 1) ware data for a selected activity budget such a grade labor hours and 2) cost data for variable and fixed costs. The report provides a basis for evaluating a managers performance in two areas production control and cost control. Flexible budgets are widely used in production and service departments How is that information used to evaluate performance?At the end of a budgeted period, you need to find out if your planned expenditures fell in line. The flexible budget is the budget with figures that are based on actual output. It is past compared to a companys static budget to get variances between what level of spending was expected and what actually occurred.