What information is found on a flexible budget report?
A flexible budget report provides information on the actual results achieved, as well as a comparison to the budgeted amounts. It allows managers to analyze the variance between the planned and actual performance of a company.
To prepare a flexible budget report, you need the following information:
1. Budgeted amounts: Start with the original budget for the period under review. This includes estimated revenues, costs, and expenses.
2. Actual amounts: Gather the actual financial data for the period, including actual revenues, costs, and expenses incurred.
3. Variances: Calculate the differences between the budgeted and actual amounts for each line item. Variances can be subdivided into two categories: favorable and unfavorable. Favorable variances occur when the actual results are better than what was budgeted, while unfavorable variances indicate that the actual results fall short of the budgeted amounts.
4. Flexible budget: Construct a flexible budget based on the actual level of activity achieved during the period. This budget recalculates the expected revenues, costs, and expenses using the actual level of output or sales activity. The flexible budget serves as a benchmark for comparison against the actual results.
5. Comparison: Compare the flexible budget amounts with the actual amounts and calculate the variances. Analyzing these variances provides insights into how well the company performed, highlighting areas of concern or potential areas for improvement.
Overall, a flexible budget report gives managers a clear picture of how well they are managing the resources of the company and helps them make informed decisions based on the variances identified.