Flexible Budgets Acc543

Topics: Costs, Variable cost, Cost, Management accounting, Fixed cost, Total cost / Pages: 5 (1125 words) / Published: Dec 9th, 2010
Flexible Budgets
Team ACC/543
Professor Deborah Fitzgerald Thomas
University of Phoenix

Team B,
You have done a great job on the assignment. I have noted some minor issues to help you on future assignments.

The purpose of this paper is to give an overview of the budget process. It analyzes flexible budgets, discusses the relationship between fixed and variable cost, explores the differences between static and flexible budgets, and how budgets assist in the cost-volume-profitability analysis.

The Purpose of Flexible Budgets A budget is a tool used by businesses to plan for upcoming revenues and expenses. Businesses understand the difficulty of planning for the future. Circumstances inevitably arise that can change the outlook of a company’s financial picture overnight. Intelligent businesses look to increase flexibility. To do this, businesses explore the relationship between fixed and variable costs, incorporate techniques to transform static budgets, and use flexible budgets to perform cost-volume-profit analysis. The relationship between fixed and variable costs used in a flexible budget A flexible budget is a statement of projected revenue and expenditure based on various levels of production. It shows how costs vary with different rates of output or at different levels of sales volume. The flexible budget responds to changes in activity and may provide a better tool for performance evaluation. It is driven by the expected cost behavior and cannot be prepared before the end of the period. A flexible budget adjusts the static budget for the actual level of output. It is more sophisticated and useful than a static budget. A flexible budget is compared to a company’s static budget to find variances between the levels of expected and actual spending. The following steps are used to prepare a flexible budget: 1. Determine the budgeted variable cost per unit of output. Also [Add comma

References: Byrne, M., & Mather, J. (1997). Managing the budget process. Club Management. Retrieved from https://ecampus.phoenix.edu Caplan, D. (2009). Flexible Budgeting. OSU. Retrieved from https://ecampus.phoenix.edu/secure/aapd/cwe/citation_generator/web_01_01.asp on 11/26/2010 Edmonds, T. P. (2007). Fundamental financial & managerial accounting concepts. Retrieved from https://ecampus.phoenix.edu Elmerraji, J. (2010). How budgeting works for companies. Investopedia. Retrieved from http://www.investopedia.com/articles/07/budgetingforcompanies.asp

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