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WK5 DQ1 - is not effective in evaluating performance The...

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What is a flexible budget? What types of organizations may use flexible budgets? Why are flexible budgets useful? Next, imagine you are preparing a business’s cash budget, which involves determining the amount of cash to keep on hand. How might the nature of the business affect your decision? Provide specific examples in your response. A flexible budget is a budget that projects data based on various level of activity. A flexible budget differs from a static budget in that the static budget is based on one level of activity. Because the flexible budget adapts to changes in operating conditions businesses such as hotels that have a change in operations due to room occupancy. Businesses that have shifts in operation benefit from the flexible budget. A company that has substantial variable costs the static budget
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Unformatted text preview: is not effective in evaluating performance. The nature of the business affects the decision of the amount of cash to keep on hand. The example used above of a hotel is a good example to use in this instance as well. Most hotels have high seasons and low seasons depending on where they are located. One would not need to keep as much cash on hand during the low season as would be needed for the high season. A company where I was previously employed provided care and service to mentally handicapped people. During the summer months it was necessary to keep more cash on hand for vacation activities. During the winter months few activities took place due to the weather. This was taken into account when preparing the budget for the year....
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