What limits the usefulness to managers of fixed budget performance reports? How can these limits be...

What limits the usefulness to managers of fixed budget performance reports? How can these limits be overcome? Provide a hypothetical example of budgeting which incorporates flexibility.

Expert Solution

Fixed budget plans are structure for the association for the accomplishment of departmental undertaking. Fixed budget plan is the spending which is intended to stay unaltered regardless of the degree of movement really accomplished .The higher administration and the chiefs utilizes the fixed spending plan to gauge the general execution.

Restrictions of Fixed Budgets:

Fixed budget plan can't be changed in incomes or expense for the year.

The monetary allowance can't be utilized for the cost control purposes.

The exhibition variables might be confused which may contain helpful information.

Adaptable spending plans can be utilized to beat fixed budget plans.

The adaptable spending plan can give data on spending fluctuations subsequent to modifying for changes in the movement volume of a business.

Adaptable spending plan gives the total examination of expected assets use at various degree of activities.

Example:-

X Company has a financial limit of $10 million in incomes and a $4 million expense of goods sold. Of the $4 million in planned expense of products sold, $1 million is fixed, and $3 million differs straightforwardly with income. Consequently, the variable segment of the expense of products sold is 30% of incomes. When the spending time frame has been finished, 'X' finds that business were really $9 million. On the off chance that it utilized an adaptable spending plan, the fixed part of the expense of products sold would in any case be $1 million, yet the variable bit would drop to $2.7 million, since it is constantly 30% of incomes. The outcome is that an adaptable spending yields a planned expense of goods sold of $3.7 million at a $9 million income level, as opposed to the $4 million that would be recorded in a static budget plan.

jeff jeffy answered 6 months ago

What is the purpose of budget performance reports? How are budget variances calculated? Which budget variances...

What is the purpose of budget performance reports? How are budget variances calculated? Which budget variances are the most important? How will variances help management assess performance?

How and to what extent are variance investigations and reports required by managers during the budget...

How and to what extent are variance investigations and reports required by managers during the budget year?

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Garland Company, a manufacturer...

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Garland Company, a manufacturer of light duty motors, follow: Garland Company Budget Performance Report—Vice President, Production For the Month Ended November 30 Plant Actual Budget Over Budget Under Budget Eastern Region $495,600 $495,600 $0 Central Region 356,800 353,200 $3,600 Western Region (g) (h) (i) $(j) $(k) $(l) $3,140 Garland Company Budget Performance Report—Manager, Western Region Plant For the Month Ended November 30 Department Actual Budget Over Budget Under...

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Garland Company, a manufacturer...

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Garland Company, a manufacturer of light duty motors, follow: Garland Company Budget Performance Report—Vice President, Production For the Month Ended November 30 Plant Budget Actual Over Budget Under Budget Eastern Region $530,900 $530,900 $0 Central Region 382,200 378,400 (3,800) Western Region (g) (h) (i) $(j) $(k) $(l) $(3,800) Garland Company Budget Performance Report—Manager, Western Region Plant For the Month Ended November 30 Department Budget Actual Over Budget Under...

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Garland Company, a manufacturer...

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Garland Company, a manufacturer of light duty motors, follow: Garland Company Budget Performance Report—Vice President, Production For the Month Ended November 30 Plant Actual Budget Over Budget Under Budget Eastern Region $389,000 $389,000 $0 Central Region 280,100 277,300 $2,800 Western Region (g) (h) (i) $(j) $(k) $(l) $3,120 Garland Company Budget Performance Report—Manager, Western Region Plant For the Month Ended November 30 Department Actual Budget Over Budget Under...

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Garland Company, a manufacturer...

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Garland Company, a manufacturer of light duty motors, follow: Garland Company Budget Performance Report—Vice President, Production For the Month Ended November 30 Plant Actual Budget Over Budget Under Budget Eastern Region $409,200 $409,200 $0 Central Region 294,600 291,700 $2,900 Western Region (g) (h) (i) $(j) $(k) $(l) $3,220 Garland Company Budget Performance Report—Manager, Western Region Plant For the Month Ended November 30 Department Actual Budget Over Budget Under...

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Garland Company, a manufacturer...

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Garland Company, a manufacturer of light duty motors, follow: Garland Company Budget Performance Report—Vice President, Production For the Month Ended November 30 Plant Actual Budget Over Budget Under Budget Eastern Region $549,800 $549,800 $0 Central Region 395,900 391,900 4,000 Western Region (g) (h) (i) $(j) $(k) $(l) $3,170 Garland Company Budget Performance Report—Manager, Western Region Plant For the Month Ended November 30 Department Actual Budget Over Budget Under...

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Delmar Company, a manufacturer...

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Delmar Company, a manufacturer of light duty motors, follow: Delmar Company Budget Performance Report—Vice President, Production For the Month Ended June 30 Plant Actual Budget Over Budget (Under) Budget Eastern Region $474,000 $474,000 $0 Central Region 337,900 341,300 (3,400) Western Region (g) (h) (i) $(j) $(k) $(l) $(3,400) Delmar Company Budget Performance Report—Manager, Western Region Plant For the Month Ended June 30 Department Actual Budget Over Budget (Under)...

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Garland Company, a manufacturer...

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Garland Company, a manufacturer of light duty motors, follow: Garland Company Budget Performance Report—Vice President, Production For the Month Ended November 30 Plant Budget Actual Over Budget Under Budget Eastern Region $447,400 $447,400 $0 Central Region 322,100 318,900 (3,200) Western Region (g) (h) (i) $(j) $(k) $(l) $(3,200) Garland Company Budget Performance Report—Manager, Western Region Plant For the Month Ended November 30 Department Budget Actual Over Budget Under...

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Garland Company, a manufacturer...

Budget Performance Reports for Cost Centers Partially completed budget performance reports for Garland Company, a manufacturer of light duty motors, follow: Garland Company Budget Performance Report—Vice President, Production For the Month Ended November 30 Plant Actual Budget Over Budget Under Budget Eastern Region $460,300 $460,300 $0 Central Region 331,400 328,100 3,300 Western Region (g) (h) (i) $(j) $(k) $(l) $3,200 Garland Company Budget Performance Report—Manager, Western Region Plant For the Month Ended November 30 Department Actual Budget Over Budget Under...

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What limits the usefulness to managers of fixed budget performance reports? How can these limits be...

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