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Flexible budgets - Coggle Diagram
Flexible budgets
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flexible budget
prepared at the end of the year. Shows what the budget should be using actual unites sold. Uses actual sales x budget sales price
using all of the same assumptions about sales price, cost of raw materials and cost of labour from he static budget – but adjusted for the actual units sold.
variance labels
favourable: means the business is more profitable than expected. This happens when there are more sales or less costs.
Unfavourable: means the business is less profitable than expected. This happens when the sales are less than expected or the costs are more than expected.
Care should also be taken if the variance or lack of variances is due to how the original budget was prepared
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actual
what happened during the year. It includes the actual sales units, actual sales price and actual costs.
variance analysis
allow the business to identify exactly what is driving higher or lower profits by digging into the components of the budget
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