Chapter 10 Flexible Budgets and Performance Analysis

Chapter 10 Flexible - Chapter 10 Flexible Budgets and Performance Analysis This chapter explores how budgets can be adjusted so that meaningful

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 10 – Flexible Budgets and Performance Analysis This chapter explores how budgets can be adjusted so that meaningful comparisons to actual costs can be made. Flexible Budget A planning budget is prepared before the period begins and is valid for only the planned level of activity. If the actual level of activity differs from what was planned, it would be misleading to evaluate performance by comparing actual costs to the static, unchanged planning budget. A flexible budget provides estimates of what revenues and costs should be for any level of activity, within a specified range. When used for performance evaluation purposes, actual costs are compared to what the costs should have been for the actual level of activity during the period. This enables “apples-to-apples” cost comparisons.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Revenue/Cost Planning Formulas Budget Number of lawns (Q) 500 Revenue ($75Q) 37,500 $ Expenses: Wages and salaries ($5,000 + $30Q) 20,000 $ Gasoline and supplies ($9Q) 4,500 Equipment maintenance ($3Q) 1,500 Office and shop utilities ($1,000) 1,000 Office and shop rent ($2,000) 2,000 Equipment Depreciation ($2,500) 2,500 Insurance ($1,000) 1,000 Total expenses 32,500 Net operating income 5,000 $ Larry's Lawn Service For the Month Ended June 30 Actual Results Number of lawns 550 Revenue 43,000 $ Expenses: Wages and salaries 23,500 $ Gasoline and supplies 5,100 Equipment maintenance 1,300 Office and shop utilities 950 Office and shop rent 2,000 Equipment Depreciation
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/25/2010 for the course MGT 11B taught by Professor Hancock during the Spring '07 term at UC Davis.

Page1 / 6

Chapter 10 Flexible - Chapter 10 Flexible Budgets and Performance Analysis This chapter explores how budgets can be adjusted so that meaningful

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online