A static budget refers to a budget set by a company that predicts a certain level of sales and output before a sales period begins, while a flexible budget evaluates actual sales at the end of a given period. Static budgets, also called original budgets, help companies and sales managers prepare financially for a set time period by allocating a certain amount of financial resources and personnel to achieve certain sales and output volumes. Like flexible budgets, they play a role in helping organizations plan for the future, using projected estimates of input and output.Know More
Flexible and static budgets serve as equally important tools for companies. Static budgets act as planning and forecasting mechanisms. Accountants and sales managers prepare budgets at the start of a set term, which might be a quarter, half-year or full fiscal year. These budgets provide a best guess for output during that period of time. The type of output measured varies depending on the classification of the organization.
Retailers and grocery chains, for instance, might predict a certain volume of clothing and food sales during a given time period. Hospitals might anticipate a certain number of patients through a period of days or months. At the end of the period established in a static budget, the flexible budget enters the picture. This budget acts as a performance evaluation and reflection tool. It compares actual output to anticipated output, showing the variation between real sales and forecast sales.Learn more about Accounting
Operating budgets pay for day-to-day expenses, while capital budgets pay for major capital, or investment, spending, writes Kevin Johnston in an article in the Houston Chronicle's Small Business section. Understanding the differences between these budgets is critical to effectively managing business finances.Full Answer >
A flexible expense is an expense that occurs on a regular schedule, but the amount allotted toward the expense can be adjusted, such as a utility bill. Expenses are typically categorized into three categories: fixed, flexible and discretionary expenses.Full Answer >
According to Investopedia, the cost of sales formula is used by adding the amount of purchases to an existing inventory, then subtracting the remaining amount of inventory at the end of a sales period. The resulting amount is the cost of sales. The cost of sales formula must be used for an individual sales period to be accurate.Full Answer >
TrueCar allows users to see the price of different cars based on actual sales from certified dealers partnered with the company. Once a user finds a car at an acceptable price, she prints a voucher that reserves the car at that price, then visits the dealer to complete the transaction.Full Answer >