Flexible Budget

In this week’s discussion, based on the reviews of the Budgets: Operations, Flexible and Cash Flows Budgets I have been asked to respond to three discussion questions and then to provide a brief explanation of how this information is important in managerial decision making. I have chosen the following 2) Identify the main purpose of a flexible budget for managers, 6) What is a price variance? What is a quantity variance? and 7) What is the purpose of using standard costs?

Identify the main purpose of a flexible budget for managers (2)
The main purpose of a flexible budget is to accurately measure costs which fluctuate as sales increase or decrease. According to Heisinger and Hoyle (2012), this is because actual sales rarely match the budgeted

With the above insights the manager will be able to; formulate an accurate cash flow schedule, prepare flexible budgets using primary data, (Heisinger and Hoyle, 2012). Not least the manager will be able to articulate the appropriacy of different models to influence those with the authority and means to allocate money, as well as to report performance against budgets – with a compelling and strong

For example, an unfavourable price variance might be caused by gaining lower supplier price than expected, or by a flood of products lowering market prices, or because of good negotiation skills in getting a lower deal. On the other hand a favourable price variance might happen because materials of lower quality materials might create waste or spoilage, or because new employees might create more waste than expected or equipment might break causing yet more waste. Unfavourable usage variance might be due to lower quality materials which the firm needs more of, or new employees that use materials than necessary, or inefficient equipment that requires more materials than expected. On the other hand, favourable usage variance might be due to higher quality materials that reduce waste, or training that helps employees use resources better, or enhanced production techniques which make more efficient use of materials, or good maintenance that means machinery uses less. (Heisinger and Hoyle,