Question

why do we need both flexible budgeting and variance analysis? which is more time consuming? which gives better information? what qualitative factors must go into analyzing each?

Answer 1

Flexible budgeting
The flexible budget is intended to get change over a period of time according to the concerns performance and its necessities.

Variance analysis
Variance analysis mainly focuses on the difference between the actual performance versus the predicted behaviour over a company's budget.

Need and qualitative factors analyzing flexible budgeting and variance analysis

• The flexible budgeting is helpful to increase or decrease companies expenses according to the current scenario of the market.
• It also keeps us away from doing over expenses to get things done as it depends upon the current statistics and also helps us to make ourselves to use the prevailing opportunities.
• Variance analysis helps us to identify the changes that should be brought in the business according to the new market trend.
• And it also keeps an eye on labour, material, purchase price changes, etc.,

More time consuming & better information
Preparing the flexible budget is more time consuming because we have to consider numerous factors such as labour costs, seasonal expenses, discounts on bulk raw material purchases, time consumption, etc., Both flexible budgeting and variance analysis should be worked out together to get the targeted results of a company over a period of time.