Flexible Budget Essay

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Flexible Budget Paper Flexible budgets provide budgeted data with different levels of activity. The purpose of a flexible budget is to make sure that the company’s budget is adjusted well and balanced. Flexible budgets refer to the adjustments that can be easily made by recording the income when necessary in order to get an accurate budget result. As this paper will discuss, there are many advantages and disadvantages to using a flexible budget. What is a Flexible Budget? Planning for the future of a business brings about difficult decisions. These can be addressed by developing a budget to assist with the upcoming revenues and expenses. Many situations and circumstances can bring about change in the company’s financial future. A successful business seeks to increase flexibility. In order to do this, the business must explore the relationship between both fixed and variable costs, implement strategies to transform static budgets, and use flexible budgets to perform cost-volume-profit analysis (“What is a Flexible Budget?,” 2010). A flexible budget is a statement of projected revenue and expenditure based on various levels of production (“What is a Flexible Budget?” 2010). Instead of using the usual fixed numbers, flexible budgets use the percentages of revenue for certain expenses. This allows for an infinite series of changes in those expenses that are budgeted and directly tied to revenue 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 more detailed flexible budget has the potential to incorporate changes to other expenses when certain larger changes occur allowing the business to use this as a tool for comparing actual and budgeted performance. Advantages Restructuring itself based

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