Flexible budget analysis vs strategic-budget analysis
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Why might managers find a flexible budget analysis more informative than a strategic-budget analysis? Explain your rationale.
How might a manager gain insight into the causes of a flexible-budget variance for direct materials?
Why might an analyst examining variances in the production area look beyond the business function for explanations of those variances?
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Solution Summary
Your tutorial is 304 words and gives you two examples of activity outside productions that impacts production variances, explains the two forces impacting materials variances, and discusses the two different reasons to study the strategic budget versus a flexible budget.
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Q: Why might managers find a flexible budget analysis more informative than a strategic-budget analysis? Explain your rationale.
A: Strategic budget analysis is more about checking to see if the strategies and initiatives are in place as authorized. Flexible budget analysis is more about cost management. The flexible budget revises the beginning of the year budget for the variable costs and re-sizes them for the actual activity during the period (whether on-strategy or not). The revised costs is what "should have been spent" given the activity during the year. The initial budget was what should ...
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