Question

In this discussion question you will describe the importance of flexible budgets and variance analysis.

Discuss, in your opinion, if flexible budgets should be prepared and why.

Answer 1

Dear Student,

I'm Elaborating the importance of flexible budgets in few points are as under.

these are the advantages of flexible budget.

1) Its a budget through which we recognising the difference between fixed and variable cost in relation to fluctuation in output, turnover & other variable factors etc.

2) Its designed to change in relation to the level of activity which our organiation attained.

3) Flexible budget is one that take account of a range of possible volumes thats why it sometime referred as a multi volume budget through a organisation can select their potential.

4) Flexible budget take place only when the original budget is deliberately amended to take account of change activity level.

5) In this budget we will treat fixed, variable & semi variable cost differently. that why we should calssify all cost into fixed, variable and semi variable cost.

Now we will talk about variance analysis:

In which we will find the differene between standard and actual.

before calculating variance we need budget for different level of activity through which we will calculate the the standard data by using budgets

standard data stands for the budgeted data for actual output. So we can say that the budgeted and standar are both related if we calculate variance so firstly we have to calculate budgeted data.

I hope i will explain this question. still you have any doubt then please reach me i will really happy to help you.

thank saty safe saty home