Flexible Budgets and Overhead Analysis

shahid amin · 08-27-2009, 08:44 PM

Budget Variance

A measure of the difference between the actual fixed overhead costs incurred during the period and budgeted fixed overhead costs as contained in the flexible budget.

Denominator Activity

The activity figure used to compute the predetermined overhead rate.

Flexible Budget

A budget that is designed to cover a range of activity and that can be used to develop budgeted costs at any point within that range to compare actual costs incurred.

Static Budget

A budget created at the beginning of the budgeting period that is valid only for the planned level of activity.

Volume Variance

The variance that arises whenever the standard hours allowed for the output of a period are different from the denominator activity level that was used to compute the predetermined overhead rate.

awaisaftab · 08-28-2009, 03:37 PM

What is the difference betweeen fixed and flexible budget?

shahid amin · 08-28-2009, 05:39 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by awaisaftab
 What is the difference betweeen fixed and flexible budget?
<hr height="1" noshade id="quote"></blockquote id="quote">
Dear sir,
According to my point of view the difference between fixed and flexible budget is as follows
The fixed budget is prepared based only on one level of output.
A flexible budget is a budget which is designed to change in accordance with the level of activity or relevant range attained.
Fixed cannot be changed after the period begins, whereas a flexible budget can be changed after the period begins
Fixed is a plan for a single level of production, whereas a flexible budget is several plans (one for each of several production levels).

Fixed includes only fixed costs, whereas a flexible budget includes only variable costs.

Please help me sir if I am wrong.

shahid amin · 08-31-2009, 04:42 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by shahid amin
 <blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by awaisaftab
 What is the difference betweeen fixed and flexible budget?
<hr height="1" noshade id="quote"></blockquote id="quote">
Dear sir,
According to my point of view the difference between fixed and flexible budget is as follows
The fixed budget is prepared based only on one level of output.
A flexible budget is a budget which is designed to change in accordance with the level of activity or relevant range attained.
Fixed cannot be changed after the period begins, whereas a flexible budget can be changed after the period begins
Fixed is a plan for a single level of production, whereas a flexible budget is several plans (one for each of several production levels).

Fixed includes only fixed costs, whereas a flexible budget includes only variable costs.

Please help me sir if I am wrong.

<hr height="1" noshade id="quote"></blockquote id="quote">
Dear sir I m waiting for your reply!

awaisaftab · 08-31-2009, 05:04 PM

I think I was not taking your test. But your reply is correct.

But the following line in wrong

"Fixed includes only fixed costs, whereas a flexible budget includes only variable costs"

Both flexible and fixed budgets contain on budgeted fixed and budgeted variable costs.

Keep it up

Regards,

Awais Aftab

shahid amin · 09-01-2009, 05:50 PM

Thanks sir!
Ok, i will try my best to clear wrong concept,

please guide me further, about study as well as about my carrer.

tariq aziz · 09-03-2009, 05:01 PM

nice effor Mr.shahid...some more explanation is needed on this topic..