Day 1
For the first week, I understand the static budgets and flexible budget.
A static budget is a type of budget that incorporates anticipated values about
inputs and outputs that are conceived before the period in question begins. When
compared to the actual results that are received after the fact, the numbers from static
budgets are often quite different from the actual results. For example, if a company’s
annual master budget is a static budget, the budget for sales commissions expense will
be one amount such as $200,000 for the year. In other words, in a static budget the
budgeted amount for sales commissions expense will remain at $200,000 even if the
actual sales during the year are $3 million, $4 million or $5 million.
A flexible budget calculates budgeted revenues and budgets costs based on the
actual output in the budget period. In contrast to a company’s static master budget, the
company’s sales department might have a flexible budget. For instance, in the flexible
budget, the sales commissions expense budget might be expressed as 5% of sales. In
that instance, the department’s budget for sales commissions expense will be $200,000