What is the difference between flexed and flexible budget?

Flexible vs flexed budget Flexible budgeting happens at the beginning of a budgeting period—revenue, costs, and profit are forecast across a range of activity levels. With this information, a flexed budget can then be created at the end of the budget period based on the actual activity level.

What is flexed budget with example?

Example of a Flexible Budget ABC Company has a budget of $10 million in revenues and a $4 million cost of goods sold. Of the $4 million in budgeted cost of goods sold, $1 million is fixed, and $3 million varies directly with revenue. Thus, the variable portion of the cost of goods sold is 30% of revenues.

What is a flexed budget?

The process of flexing a budget involves identifying the behaviour of costs and revenue and applying these behaviours to different output levels. Once a budget has been flexed it can then be compared with actual figures and used to calculate variances.

How is flexed and actual budget calculated?

To compute the value of the flexible budget, multiply the variable cost per unit by the actual production volume. Here, the figure indicates that the variable costs of producing 125,000 should total $162,500 (125,000 units x $1.30).

What are the advantages of flexible budget?

Why make a flexible budget? The biggest advantage to a flexible budget is that it more accurately reflects the state of your finances. The alternative, static budgeting, can’t account for unexpected expenses or changing income. A flexible budget will help you track where you can adjust spending each month.

How many ways can you prepare a flexible budget?

three methods
There are three methods of preparing a flexible budget: Tabular Method or Multi-Activity Method. 2. Charting Method.

How do you prepare a flexible budget?

The following are steps you can take to create a flexible budget for your business:

Identify which costs are variable and which costs are fixed. Fixed costs typically include expenses such as rent and monthly marketing costs.
Divide the budget.
Create your budget with set fixed costs.
Update the budget.
Input and compare.

What is the flex in a flexible budget?

A flexible budget, or “flex” budget varies with changes in the amount of actual revenue earned. In its simplest form, the flex budget will use percentages of revenue for certain expenses, rather than the usual fixed numbers.

What is the flexible budget amount for direct materials?

Flexible-budget amounts based on $10 per unit of output for direct materials and $8 per unit for direct labor. Flexible-budget cost is the standard quantity allowed for the actual level of activity multiplied by the standard price per unit.

How would you explain a high cost variance in a flexible budget?

A flexible budget variance is any difference between the results generated by a flexible budget model and actual results. If actual revenues are inserted into a flexible budget model, this means that any variance will arise between budgeted and actual expenses, not revenues.

What are the disadvantages of flexible budget?

Pros and Cons of Flexible Budgeting

Pros	Cons
Less-rigid resource allocation	Time consuming, requires more maintenance and oversight
Allows companies to address unpredicted conditions and circumstances, like market fluctuations and business volume	Limits ability to plan in some areas when budget is changing

What’s the difference between a flexible budget and a flexed budget?

Register now or log in to answer. Flexible Budget is a budget which (by recognising the difference between fixed, semi-fixed and variable costs) is designed to change in relation to the level of activity attained. A flexible budget is a budget that is prepared for a range, i.e., for more than one level of activity.

How does flexible budget work for Yoga Inc?

When flexible budgets are adjusted to a series of possible activity levels, the resulting data helps anticipate the effect of changes in activity levels on revenues and costs thus allowing management to make useful adjustments to plans. Following is the static budget and actual results of Yoga Inc. for the month of April 20X4.

Which is the best tool for flexible budgeting?

One tool that many companies find helpful is the flexible budget. This type of budgeting changes with a company’s level of activity or volume and is especially useful for businesses that see a lot of variations in cost-related activities throughout the year.

How to calculate the variance of a flexible budget?

The next step is to subtract flexible budget amounts from actual figures to obtain the required variances. For income items (revenue, contribution margin and operating income in this example), the flexible budget variance is favorable when actual numbers exceed flexible budget numbers and vice versa.

What is the difference between flexed and flexible budget? Flexible vs flexed budget Flexible budgeting happens at the beginning of a budgeting period—revenue, costs, and profit are forecast across a range of activity levels. With this information, a flexed budget can then be created at the end of the budget period based on the actual…