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    Differences in flexible and static budget

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    1. You are in a job interview and your possible employer asks you to describe the differences between the flexible and the static budget and to explain which you would recommend for a small business and why. How would you respond to this potential employer?

    2. Consider the three different centers in a company's cost center, profit center, and investment center. Which of these three centers would you prefer to work under if given the choice and why?

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    Solution Preview

    1. You are in a job interview and your possible employer asks you to describe the differences between the flexible and the static budget and to explain which you would recommend for a small business and why. How would you respond to this potential employer?

    Budget is a comprehensive financial plan of allocation of financial resources. Budgeting has got multiple purposes. In fact it can be used for all of the above that is scorekeeping, attention directing and problem solving. Budgeting helps in score keeping as it helps in comparing the standards with actual. It helps in identifying variation and enable organization to take corrective actions. Budgeting helps managers make decisions about resources needed and financial results expected for the coming period. Budgets are used to control activities of an organization because they set out a plan for the entire organization. It helps in attention directing to the variations and also to understand the action plan. Moreover it helps in coordination between different departments. It also helps in problem solving in one more way which is budgeting compels manager to think about the future and then to take right action.

    As per Investopedia, "Static budget is a type of budget that incorporates anticipated values about inputs and outputs that are conceived before the period in question begins. "

    As per wikianswers "Static budget is a budget which envisages only one level of business activity. Here business activity means volume of production or ...

    Solution Summary

    Response explains differences in flexible and static budget; cost vs profit vs investment center

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