Flexible Budgeting

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Question 1.

The operating budget includes the revenues and expenses during the fiscal year, while the cash budget focuses on the coming year. The operating budget is usually more in depth. The cash budget would let the people know if they have enough money on hand or will there be able to collect the money needed during the upcoming year. The focus of a cash budget would be to estimate the incoming revenues the company has coming in the upcoming year of the budget. It would allow organizations to know when cash was becoming available to the company.

Both the operating and cash budgets estimate different types of revenues and expenses or expenditures. So, if I run a nonprofit organization, a lot of my revenue would be coming from donations,
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Workload level is used to refer to the volume of goods or services that the organization will provide (85). The flexible budget works as an aid for managers to budget the different workload levels. The budget adjusts based on the revenue coming into the organization and the workload levels. Rather than using fixed numbers, a flexible budget focuses on an output measure and shows if something needs increased or decreased. The flexible budget can help management make adjustments according to the budget. It gives alternatives for potential change in …show more content…
Break even Analysis allows the organization or company to determine when it will start making a profit, after all other expenses have been covered. It will help determine a company’s revenue and the costs spent in order to identify when the company will breakeven. Breakeven point=fixed costs/(unit selling price-variable costs), in other words, breakeven point=fixed costs/contribution margins.

A cause for an organization’s breakeven point to increase would be a rise in fixed costs. If the organization is renting a building for their offices and there is a new contract that causes the rent to rise, this would cause a rise in fixed costs, which would cause the break-even point to increase. If there was also a decrease in the contribution margin, this would cause the break-even point to increase. It would take more sales in order to cover the cost of both the fixed costs and expenses.

A cause for an organization’s breakeven point to decrease would be to reduce the organization’s amount of fixed costs and/or variable costs, because this would then increase the organization’s contribution margin, which plays a vital part in figuring out the organization’s break-even point. Another way to decrease the break-even point would be to increase the number of units sold or to even increase the cost of each unit, if that wouldn’t make the number of units sold decline

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