Flexible Budgets and Performance Analysis

Flexible Budgets and Performance Analysis - Chapter 9...

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Chapter 9 Flexible Budgets and Performance Analysis Characteristics of Flexible Budgets: planning budgets are prepared for a single, planned level of activity Performance evaluation is difficult when actual activity differs from the planned level of activity May be prepared for any activity level in the relevant range Show costs that should have been incurred at the actual level of activity, enabling “apples to apples” cost comparisons Help managers control costs Improve performance evaluation Deficiencies of the Static Planning Budget: the relevant question is How much of the cost variances are due to higher activity and how much are due to cost control? To answer the question, we must flex the budget to the actual level of activity F: Favorable Variance occurs when actual revenue is greater than budgeted revenue U: Unfavorable Variance that occurs when actual costs are greater than budgeted costs F: Favorable Variance
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  • Fall '08
  • Robbins
  • actual level

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