Chapter 24, Problem 3CP

To determine

Flexible Budget Performance report:

Flexible budget is prepared for the actual performance being undertaken during the period. The static budget of a certain level of activity is converted in to activity actually taken place during the place.

Now after flexible budget is prepared for actual activity (i.e. standard performance has been fixed for each cost), there are three main element of each respective cost is available i.e. amount as per static budget, amount as per flexible budget and actual amount incurred or received during the year. The Static budget amount and flexible budget amounts are compared to know the volume variance which acknowledges the difference due to change in activity level.

The difference between flexible budget amounts and actual amounts are taken as spending variance which acknowledges the difference due to cost or price effect.

The preparation of Flexible budget Performance report.