Flexible Budgets & Perfomance Measurement.

By shadrick Categories: C-MA, CA-FM
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About Course

In performance measurement it is vital that mangers are held responsible over activities and systems over which they have control. When it comes to comparing Actual results achieved against Standards set or Budgets there is need to clearly separate costs that are within management’s control (variable and controllable) from those outside their control(fixed). It is for this reason that and others that I introduce Flexible budgets as both a planning and performance measurement tool especially for those seating a management accounting course.

What Will You Learn?

  • The following are the key areas under which the examiner may require a demonstration of the necessary skill in this topic and the question will greatly depend on the data given as follows;
  • IF DATA GIVEN IS… EXAMINER’S REQUIREMENT
  • Budgeted Data ONLY Preparation of Flexible budgets at various or different activity levels (see e.g.,2 Foolex Co.)
  • Budgeted Data and Actual Results Preparation of a Flexible budget at actual activity level and Calculation of Variances (see e.g.,3 Foolex Co.)
  • In this article I will concentrate on those two key areas that you are like to face in your exams.
  • Let me begin by reminding you of the basic concepts and assumptions underlying this interesting topic.

Course Content

Key Definitions
Fixed Budget: A budget prepared for a one specific level of activity Flexible Budget: A budget prepared for various level of activity which by recognizing different cost behavior patterns (Variable and Fixed) is designed to change.

  • Key Definitions
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The High Low Method

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