Flexible budget problem - download as pdf file (pdf), text file (txt) or read online prob. A flexible budget, on the other hand, is only created once the actual sales volume is known, which greatly reduces problems with variance such as inefficiencies in available labor, but, at the same time, makes the flexible budget a more immediate and critical concern for day-to-day operations. 1 baker's urban diner is a charity supported by donations that provides free meals to the homeless the diner's budget for december was based on 2,400 meals, but the diner actually served 2,300 meals the diner's director has.
With the preparation of a flexible budget the problem can be solved thus, a flexible budget can be defined as a range of budgets which covers a number of different expected levels of activity. The flexible budget solves this problem, providing both senior executives and middle management with dynamic guidance on how much to spend based on the business' changing reality in this way, the flexible budget is able to account for both fixed and variable expenses in a better, more responsive way than the simpler static budget could.
A flexible budget can help managers to make more valid comparisons it is designed to show the expected revenue and the allowed expenditure for the actual number of units produced and sold comparing this flexible budget with the actual expenditure and revenue it is possible to distinguish genuine efficiencies. Thus, a flexible budget can be defined as a range of budgets which covers a number of different expected levels of activity it becomes possible to draw up an appropriate ‘flexible’ budget from the range once actual production is known, also the expenses can be set out which would be appropriate to the achieved level of activity. Thus, authenticity of a flexible budget will always be at risk at times, getting information for analyses can be extremely costly which, in turn, increases the overall cost of the organization’s operations. Webb, inc uses a flexible budget for manufacturing overhead based on machine hours variable manufacturing overhead costs per machine hour are as follows: indirect labor $600 indirect materials 25 maintenance 08 utilities 03 fixed overhead costs per month are: supervision $600 insurance 200 property taxes 300 depreciation 900 the company believes it will normally operate in a range of 2,000 to 4,000 machine hours per month.
A flexible budget is a budget that adjusts or flexes for changes in the volume of activity the flexible budget is more sophisticated and useful than a static budget , which remains at one amount regardless of the volume of activity. Cost accounting - flexible budgets problems add remove 1 baker's urban diner is a charity supported by donations that provides free meals to the homeless the diner's budget for december was based on 2,400 meals, but the diner actually served 2,300 meals a flexible budget should never be prepared is incurred, it is debited to the.
Preparation and analysis of a flexible budget performance report refer to the information in problem 8-3a pebco company’s actual income statement for 2011 follows required 1 prepare a flexible budget performance report for 2011 analysis component 2 analyze and interpret both the (a) sales variance and (b) direct materials variance. Problem 4 - marshall company uses flexible budgets items from the budget for march in which 2,000 units were produced and sold appear below: items from the budget for march in which 2,000 units were produced and sold appear below. On outppp put planned at start of period from a flexible budget the budget that is adjusted (flexed) to recognize the actual output level 3 learning objective 2: develop a flexible budget proportionately increase variable costs keeppp fixed costs the same and compute flexible-budget variances .
A flexible budget is a budget that adjusts or flexes for changes in the volume of activity the flexible budget is more sophisticated and useful than a static budget, which remains at one amount regardless of the volume of activity assume that a manufacturer determines that its cost of electricity. A static budget is the starting point for determining a reasonable profit for your business but a static budget assumes one level of output that never changes this can create problems that are fixed by using flexible budgeting. Preparing a flexible budget at 100% capacity of 100,000 labor hours, what would be the variable and fixed costs at 100% capacity at 80,000 direct labor hours the variable cost is $5 per hour (400,000/80,000), the same amount per hour as at 100,000 hours. Flexible budgets are particularly valuable for control purposes in manufacturing industry because they can be used to remove those variances that are simply caused by actual sales volumes differing from the budget.
A flexible budget allows you to cut or increase spending, depending on marketplace and business conditions this allows you to avoid unforeseen problems and take advantage of unexpected opportunities. Solution of problem no 18-2 level of activitie particulars direct labor hours 80% 40,000 variable expenses: 1 shop supplies (010 per direct labor hours.