Flexible Bugets

Flexible Budgets

We are talking about flexible budgets and how they help with businesses. If we did not have flexible budgets every business would be in the red. Because they plan for one thing and enough having another thing happen during that budget month.

Developing a Flexible Budget

When we develop a master budget we need to take the following steps. First is to identify the activities index and relevant range of activities. Second is the identified the valuable costs and determine the budgeting budgeted variable cost per unit of activity for each costs. Third identify the fixed costs and determine the budgeted did amount for each cost. Fourth prepare the budget for increments of activity within the relevant and range.

Flexible Budget Report

This is monthly comparisons of the annual and budgeted manufacturing overhead costs of the company. As in the last paragraph we break down the questions even more number one the activity index is in direct labor hours. Second three variable costs is found by dividing each total budgeted costs by the direct labor hours using in preparing the master budget. Third there are three fixed costs that budget amount is found by dividing each annual budget costs by 12. Fourth management decides to prepare the budget in increments of 10,000 direct labor hours.

Evaluate Performance

When management reviews the budget report they focus on the entire or primary differences between the actual results in the planned objects. This approach enables top management to focus on problem areas.

Conclusion

Where would we be if we did not have this flexible budget for companies? Using this type of budgeting helps companies put together a better budget with what they are manufacturing at the time.