What does a flexible budget performance report do that a simple comparison of budgeted to actual results not do?

What does a flexible budget performance report do that a simple comparison of budgeted to actual results does not do? The differences between the actual results and the flexible budget are the revenue and spending variances.

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What does a flexible budget performance report compare?

Definition: A flexible budget performance report is a management report that compares the actual revenues and costs for a period with the budgeted revenues and costs based on the actual sales volume.

What is the difference between a flexible budget and an actual budget?

Variances or differences in the actual budget give a small business important information about performance elements such as overhead costs and profit. A flexible budget is a kind of budget that can easily change input variables over time. It forecast revenues and expenses with a variety of activity levels.

What does a flexible budget tell you?

A flexible budget is one based on different volumes of sales. A flexible budget flexes the static budget for each anticipated level of production. This flexibility allows management to estimate what the budgeted numbers would look like at various levels of sales.

What is the purpose of budget performance reports?

The Profit & Loss by Budget Performance Report lines up your forecasted budget alongside your actual numbers over a specific financial period. This allows you to easily see what ‘budget items’ went as expected, which outperformed expectations, and which did not meet expectations.

What is a flexible report?

Flexible reporting changes the way that you can create and use your ad hoc reports. It is designed to increase the speed of creating custom reports and allow the flexibility of making immediate changes to the report easier than having to make a new or edit a previous ad hoc report using the standard method.

What are flexible budgets and how are they used for performance analysis?

A flexible budget performance report combines activity variances and revenue and spending variances on one report. Common errors in comparing actual costs to budgeted costs are to assume all costs are fixed or to assume all costs are variable.

Why is it more useful to compare actual financial results to a flexible budget instead of to a master budget?

The greatest advantage that a flexible budget has over a static budget is its adaptability. In the real world, change is real and it is constant. A flexible budget can handle that reality and better position a company for the challenges of the marketplace. Fixed versus variable expenses in a flexible and static budget.

Why does a flexible budget report provide a better basis for evaluating performance than the report based on static budget data?

A flexible budget allows a business to see more variances than a static budget. Making a static budget involves the use of assumptions and predictions about sales, the market, economic conditions and other factors that impact a business before the budget period begins; these assumptions might not be correct.

What do you understand by flexible budget how does it differ from a fixed budget explain its utility to a business Organisation?

Key Differences Between Fixed and Flexible Budget
A fixed budget is a budget that doesn’t change due to any change in activity level or output level. The flexible budget is a budget that changes as per the activity level or production of units. The fixed budget is static and doesn’t change at all.

How do you do a flexible budget performance report?

To prepare a flexible budget performance report, you identify key figures based on the flexible budget formula. If your company’s formula says, for example, that COGS should be 25 percent of sales and sales were $75,000 for the period, COGS should be $18,750.

Which of the following may appear on a flexible budget performance report?

Transcribed Image Text:Which of the following may appear on a flexible budget performance report? Multiple Choice An unfavorable spending variance. An unfavorable activity variance. All of the above may appear on a flexible budget performance report.

Why is flexible budgeting important?

Flexible, rolling budgets empower entrepreneurs to cope with change. This nimble planning process lets you adjust spending throughout the year; benefits include less overspending, more opportunities and speedier responses to changing market and business conditions.

How is the preparation of a flexible budget performance report important?

As a planning tool, flexible budgets are prepared to enable a firm to quantify expected results at different activity levels. As a control tool, flexible budgets are used to evaluate actual results by restating the original static budget figures to the actual level of activity achieved.

What is a flexible budget variance report?

A flexible budget variance is any difference between the results generated by a flexible budget model and actual results. If actual revenues are inserted into a flexible budget model, this means that any variance will arise between budgeted and actual expenses, not revenues.

Can we use flexible budget as performance measurement?

Performance Measurement
Since the flexible budget restructures itself based on activity levels, it is a good tool for evaluating the performance of managers – the budget should closely align to expectations at any number of activity levels.

What is the advantage of using flexible budget to evaluate the firm’s performance as opposed to static budget explain?

The greatest advantage that a flexible budget has over a static budget is its adaptability. In the real world, change is real and it is constant. A flexible budget can handle that reality and better position a company for the challenges of the marketplace. Fixed versus variable expenses in a flexible and static budget.

Why is the flexible budget a better way to measure performance than the static budget?

A flex budget uses percentages of revenue or expenses, instead of fixed numbers like a static budget. This approach means you’ll easily be able to make changes in the budgeted expenses that are directly tied to your actual revenue.

Why flexible budget variances are usually better indicators of performance than static budget variances?

Flexible-budget variances are a better measure of sales price and cost performance than static-budget variances because they compare actual revenues to budgeted revenues and actual costs to budgeted costs for the same output.

Which of the following may appear on a flexible budget performance report?

Transcribed Image Text:Which of the following may appear on a flexible budget performance report? Multiple Choice An unfavorable spending variance. An unfavorable activity variance. All of the above may appear on a flexible budget performance report.

Can we use flexible budget as performance measurement?

Performance Measurement
Since the flexible budget restructures itself based on activity levels, it is a good tool for evaluating the performance of managers – the budget should closely align to expectations at any number of activity levels.

Why a flexible budget can improve performance evaluations?

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. Fixed factory overhead is the same no matter the activity level, and variable costs are a direct function of observed activity.

What is a flexible budget variance report?

A flexible budget variance is any difference between the results generated by a flexible budget model and actual results. If actual revenues are inserted into a flexible budget model, this means that any variance will arise between budgeted and actual expenses, not revenues.

Why does a flexible budget report provide a better basis for evaluating performance than the report based on static budget data?

A flexible budget allows a business to see more variances than a static budget. Making a static budget involves the use of assumptions and predictions about sales, the market, economic conditions and other factors that impact a business before the budget period begins; these assumptions might not be correct.

How do you prepare a flexible budget performance report?

To prepare a flexible budget performance report, you identify key figures based on the flexible budget formula. If your company’s formula says, for example, that COGS should be 25 percent of sales and sales were $75,000 for the period, COGS should be $18,750.