Flexible Budget

Flexible Budget

A Master budget is prepared at the start of the budgeting process. It includes the activities and expenses that will contribute to the overall cost. However, the expenses may change due to several reasons. One is due to inflations where commodities’ prices might increase, especially if the budget was to be accomplished in the future (Ahmed, 2019). As indicated in the flexible budget variance, the sales and cost volume are increasing. A key change in on the facility. In the initial budget, there was a specific number of people to be hosted in the facility. An extended invitation to include former members increases the facility’s cost despite having a constant allocated fund.

While budgeting, the meal is for a specific number of people. However, if there is a shift like an increase in the number of people in attendance, the variance will be positive, and the cost will shift upwards. If the turn-up is low and the number of people in attendance is few, the variance value will be negative, shifting downwards. An addition of something like dessert has made the meal’s cost increase as indicated in the variance. It is unfavorable as it is increasing the cost of the budget. Another unfavorable activity is the postage and facility resulting from an increase in the list of attendance.

The organization is non-profitable, but the concern of the members of the committee is on the cost. The cost that the organization will incur is connected with the due charges for each of the members. The main role of the non-profit organization is on the utilization of the resources that are within their disposal (Ahmed, 2019). The fore being concerned about the cost is important to the organization as it would have been for any profitable organization.

References

Ahmed, R. (2019). Flexible budgets. Inter Disciplinary Research and Academic Items.