Question: What Is Flexible Budget Example?

What is a flexible budget used for?

Flexible budgeting can be used to more easily update a budget for which revenue or other activity figures have not yet been finalized.

Under this approach, managers give their approval for all fixed expenses, as well as variable expenses as a proportion of revenues or other activity measures..

What does a flexible budget look like?

A flexible budget is a budget that adjusts or flexes with changes in volume or activity. … For costs that vary with volume or activity, the flexible budget will flex because the budget will include a variable rate per unit of activity instead of one fixed total amount.

What are three types of flexible expenses?

There are three major types of expenses we all pay: fixed, variable, and periodic.

What is the difference between static and flexible budgets?

A flexible budget is one that is allowed to adjust based on a change in the assumptions used to create the budget during management’s planning process. A static budget, on the other hand, remains the same even if there are significant changes from the assumptions made during planning.

What is budget planning?

Budgetary planning is the process of constructing a budget and then utilizing it to control the operations of a business. The purpose of budgetary planning is to mitigate the risk that an organization’s financial results will be worse than expected. … Create budgeting policies and procedures.

Does a flexible budget contains fixed costs?

In a flexible budget, those expenses that do not change within a sales range appear primarily as fixed costs. One example is maintenance and cleaning. … In addition, companies typically break generally variable costs into fixed and variable components.

What is flexed budget with example?

A flexible budget adjusts the master budget for your actual sales or production volume. For example, your master budget may have assumed that you’d produce 5,000 units; however, you actually produce 5,100 units.

What are the characteristics of flexible budget?

The important characteristics of flexible budget can be pointed as follows:Wide Range. Flexible budget covers a range of activities because it is prepared to show the expected cost and revenue for different levels of activities.2.. Flexibility. … Performance Evaluation. … Changes. … Replace Of Static Budget.

What is difference between fixed and flexible budget?

Fixed budget is inflexible and does not change with the actual volume of output achieved. Flexible budget can be suitably recasted quickly according to level of activity attained. Fixed budget assumes that conditions would remain static. Flexible budget is design to change according to changed conditions.

What companies use flexible budgets?

Organizations such as restaurants, manufacturing companies and even hotels use flexible budget because these budgets respond quickly to keep the company of the organization profitable. It allows these companies or organizations to meet the changing everyday needs of the company’s business activities.

What is a fixed budget?

A budget that does not take into account any circumstances resulting in the actual levels of activity achieved being different from those on which the original budget was based. Consequently, in a fixed budget the budget cost allowances for each cost item are not changed for the variable items. Compare flexible budget.

What is the flexible budget?

A flexible budget is a budget that adjusts to the activity or volume levels of a company. Unlike a static budget, which does not change from the amounts established when the budget was created, a flexible budget continuously “flexes” with a business’s variations in costs.

What are 5 expenses that are flexible?

Flexible expense examples include groceries, dining out, entertainment, and even utilities….Here are some examples of variable essential costs:Groceries.Cell Phone Plans.Internet Services.Transportation Costs (gas, level of insurance coverage, etc.)Utilities.

What are the types of budget?

Four Main Types of Budgets/Budgeting Methods. There are four common types of budgets that companies use: (1) incremental, (2) activity-based, (3) value proposition, and (4) zero-based. These four budgeting methods each have their own advantages and challenges, which will be discussed in more detail in this guide.

What is the meaning of flexible?

capable of being bent, usually without breaking; easily bent: a flexible ruler. susceptible of modification or adaptation; adaptable: a flexible schedule. willing or disposed to yield; pliable: a flexible personality.