Flexible Budgets and Overhead Analysis

[shahid amin]

<font color="blue"><b>Budget Variance</b></font id="blue">

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.

<font color="blue"><b>Denominator Activity</b></font id="blue">

The activity figure used to compute the predetermined overhead rate.

<font color="blue"><b>Flexible Budget</b></font id="blue">

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.

<font color="blue"><b>Static Budget</b></font id="blue">

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




<font color="blue"><b>Volume Variance</b></font id="blue">

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]

What is the difference betweeen fixed and flexible budget?

[shahid amin]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by awaisaftab</i>
<br />What is the difference betweeen fixed and flexible budget?
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Dear sir,
According to my point of view the difference between fixed and flexible budget is as follows
<b>The fixed budget</b> is prepared based only on one level of output.
<b>A flexible budget</b> 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]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by shahid amin</i>
<br /><blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by awaisaftab</i>
<br />What is the difference betweeen fixed and flexible budget?
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Dear sir,
According to my point of view the difference between fixed and flexible budget is as follows
<b>The fixed budget</b> is prepared based only on one level of output.
<b>A flexible budget</b> 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"></font id="quote"></blockquote id="quote">
Dear sir I m waiting for your reply!

[awaisaftab]

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]

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]

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