Flexible Budget Variances
Evaluating Performance at Actual Activity Levels
Flexible budget variances compare actual results with a budget adjusted for actual activity. This approach removes the impact of changes in sales volume and focuses on operational performance.
- Adjust budgets to actual activity levels.
- Separate operational efficiency from volume effects.
- Improve fairness in performance evaluation.
- Support managerial accountability.
Tip
Flexible budget variances provide more meaningful performance evaluations than comparisons with static budgets.
Summary
Flexible budgets isolate performance differences that management can more directly influence.