Flexible Budgets and Overhead Analysis

1
Flexible Budgets and Overhead Analysis

• Chapter Eleven
• Handout 11

2
Static Budgets and Performance Reports

• Static budgetsare prepared fora single,
  plannedlevel of activity.

Performance evaluation is difficult when
actual activity differs from the planned level of
activity.
3
Static Budgets and Performance Reports
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4
Static Budgets and Performance Reports

• The relevant question is . . .
• How much of the favorable cost variance is due
  to lower activity, and how much is due to good
  cost control?
• To answer the question,we mustthe budget to
  theactual level of activity.

5
Preparing a Flexible Budget
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6

Flexible Budget Performance Report
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