A flexible budget is the budget which we can easily change if there is increase or decrease the activities. These activities may be relating to production, sales or recruitment or paying any expenses. This budget is better than static budget.
For example, in factory, 10000 labourers are working who is getting $ 10 per hour. So, our normal budget is $ 1,00,000. Due to increasing the orders, we have increased no. of labour up-to 20000, so, our HR budget will also reach $ 2,00,000, so, this is the example of flexible budget. In winter, we have decreased the number of labourers upto 2000 due to not getting order, our labour cost budget will decrease also up-to $ $20000.
Advantages of Flexible Budget
1. Flexible budget is just like the clothes of a person who is going to planet. These clothes are made with systematic way which absorb every coldness of other planet. Except this, it is also flexible for every type of temperature of any planet. Like this, flexible budget can adjust on the basis of current increasing or decreasing of incomes and expenses.
2. It helps to make better plan because budget can change if we get more orders than expectation
3. This budget will be more updated. So, variance between actual and budget data will be lowest.
Steps of Making Flexible Budget
1. Estimated Your Incomes
2. Estimated Deducted Fixed expenses
3. Now, see rest estimated incomes. On this basis, fix your estimated variable expenses.
Part 2
For example, in factory, 10000 labourers are working who is getting $ 10 per hour. So, our normal budget is $ 1,00,000. Due to increasing the orders, we have increased no. of labour up-to 20000, so, our HR budget will also reach $ 2,00,000, so, this is the example of flexible budget. In winter, we have decreased the number of labourers upto 2000 due to not getting order, our labour cost budget will decrease also up-to $ $20000.
Advantages of Flexible Budget
1. Flexible budget is just like the clothes of a person who is going to planet. These clothes are made with systematic way which absorb every coldness of other planet. Except this, it is also flexible for every type of temperature of any planet. Like this, flexible budget can adjust on the basis of current increasing or decreasing of incomes and expenses.
2. It helps to make better plan because budget can change if we get more orders than expectation
3. This budget will be more updated. So, variance between actual and budget data will be lowest.
Steps of Making Flexible Budget
1. Estimated Your Incomes
2. Estimated Deducted Fixed expenses
3. Now, see rest estimated incomes. On this basis, fix your estimated variable expenses.
Video Tutorials
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