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Cost Behavior and Drivers

1. How do cost behavior and cost-drivers affect flexible budgets?

2. The sales budget might be crucial, but what about the other budgets?

3. Would a master budget still be useful if one or more of the operating or financial budgets are left out?

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1. How does cost behavior and cost-drivers affect flexible budgets?

Cost behavior and cost-drivers do affect flexible budgets in a number of ways. For example, since products do drive costs for each part, then the budget has to remain flexible during this process because of inflation or other macroeconomic concerns that could arise because of the possibility that price could change at any moment. Not only that, but also customer's budgets themselves change much too because of them receiving bonuses or the inability to pay for anything that they need. As a result, a company has to remain as flexible as possible in order that they are able to maintain the necessary income to survive on a regular basis, such as the ability to pay for fixed costs that could occur upon entering their chosen market. Through looking at these ...

Solution Summary

This solution discussed cost behavior and drivers as well as budgets.

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