Essay about flexible budget

1273 Words Aug 20th, 2014 6 Pages
“Team B” Flexible Budget
Tenecia Blevins, Zokieya Canida, Robert Edmonds, Carl Hignite, Harold Smith
Accounting - ACC/561
September 1, 2014
Myrtle Clark

Flexible Budget
Organizations in today’s ever-changing global market make use of budgeting to help measure performance, plan, and control its business operations. Organizational leaders make use of flexible budgets to help take into consideration; various uncertainties that may emerge after business operations commence. According to Kimmel, Weygandt, and Kieso (2011), organizations additionally make use of flexible budgets to help them address changes in the volume of activity as well as for performance evaluation tools when used in conjunction with the static budget.
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Flexible budget analysis can help an organization measure performance. According to Velmurugan (2010), performance variance can help organizations garner vital information regarding its performance. Velmurugan (2010) as well notes making use of flexible budget variance has two significant attributes for performance, which include effectiveness, and efficiency. Efficiency refers to the amount of input an organization makes use of to achieve a particular level of output, whereas effectiveness refers to the measure, in which the predetermined objective is achieved according to Velmurugan (2010).
Additionally, an organization can compute the following variances using its flexible budget these include the following; direct material variance, direct labor variance, value production variance, fixed production overhead variance, and sales variances. According to Kimmel et al., (2011), variance analysis is a budgetary control tool that can help an organization evaluate performance by variances between its budgeted amount, its planned amount, and the actual amount incurred or sold by the organization. According to Kimmel et al., (2011), variance analysis can help organizational leaders understand the organizations present cost, which

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