Examples Of Flexible Budget

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Define a flexible budget A flexible budget is a budget that adjusts or flexes for changes in the volume of activity. In other words, it is “a revised master budget based on the actual activity level” (Heisinger & Hoyle, 2012, p. 745). In a given business activity, a flexible budget represent what cost or the cost that should be allocated to a particular activity. So, it is fair to conclude that a flexible budget has the capacity to adjust expenses based on changes in actual revenue or other activities of a company. Provide an example of how a flexible budget is used in the real world. There are various examples that can be deduced from how a flexible budget is used in the real world. However, one essential example is when a company intends…show more content…
It has two separate categories, which are material price variance and material quantity variance. While materials price variance take into considerations the difference between actual costs for materials purchased and budgeted costs based on the standards, materials quantity variance is concerned with the difference of actual quantity of materials used in producing a good and the materials budgeted to implement the production according to the standard (Heisinger & Hoyle, 2012). So under direct materials variance, one aspect is looking at the actual cost of material that a company purchased from the budgeted costs of materials. The other aspect is focus on the actual materials used in the production from what was originally budgeted for. On the other hand, a direct labor variance analysis is a process that enables managers to identify if a labor variance exists, and if it does, is it caused by the rate paid to employees or the efficiency with which employees work. In comparison to a direct materials variance, a direct labor variance consists of two categories, which are labor rate variance and labor efficiency variance (University of North Florida, 2015). Like materials cost variance, labor rate variance is concerned with the difference in actual costs paid for direct labor and what is budgeted for labor according to…show more content…
A cost center is a division in a company that is responsible for costs. In other words, this cost center does not generate revenues directly but rather costs are allocated to its; that means a cost center incurs cost to the business without necessarily generating revenues and assets directly. For instance, the accounting department of a company does not directly generate revenues or manufacture products. However, such cost centers are allocated cost to continue its operation. Therefore, managers heading such a division are often evaluated based on how they judiciously manage costs of their services to the company (Accounting in Focus, n.d.). So, a cost center exemplifies a responsibility center while an accounting division of a company embodies a cost

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