Create an answer of a couple of paragraphs for the next 2 posts about flexible budgets. You just need to comment something related with the post and the topic.

You just need to cited something if you used some sources from some website if it is just a personal opinion/reflexion is ok without references.

1st:

General production costs include fixed, variable, and mixed costs, so controlling these costs creates problems for businesses. A large part of this problem can be solved by making use of flexible budgets. Flexible budgets are budgets that consider the effect of changes in the volume of activity on the cost and facilitate the estimation of the cost that will occur for each activity level in a certain activity range (Ekholm, Wallin, 2011).

Flexible budgets are a schedule of costs or expenses for each subdivision of the business that specifies how each expense will change with changes in volume, output, or activity, and which individual expenses will be of varying volumes rather than a specific or fixed volume. The flexible budget method, also known as the audit budget, is used especially when sales and production costs cannot be predicted with certainty (Ekholm, Wallin, 2011).

In a complex business, it is not possible for all variable overhead production costs to be affected by a single factor such as the number of products produced or direct labor hours or machine hours. The flexible budget approach makes it possible to benefit from more than one cost driver (Ekholm, Wallin, 2011). In this case, the cost formula for each variable cost element is prepared separately depending on the cost driver of the variable cost in question. Activity-based costing is also used in this regard.

For example, suppose a manufacturer's variable electricity cost for the factory and machine usage per hour is about $10. It is also known that factory audit, depreciation and other fixed costs total $40,000 per month. Generally, the production team works between 4000 and 7000 hours per month. Based on this information, the flexible budget for each month would be $40,000 + $10 per machine. If the production team must work a total of 5000 hours in January, the flexible budget for January would be $90,000 ($40,000 fixed + $10 x 5000).

2nd:

A flexible budget is a budgetthat adjusts or fluctuates with changes in volume or activity (Averkamp, para. 1). unlike a static budget, A flexible budget is a series of budgets prepared for various levels of activities, revenues and expenses. Flexible budgets vary during the year for actual sales levels, changes in cost of production and virtually any other change in business operating conditions (Woodruff, 2019). This flexibility to adapt to change is useful to owners and managers in many ways. Managers like to use flexible budgets so they can get a better understanding of situational scenarios of the company when it can affect things like their revenue and perfomance evaluation. Mangers could also use the flexible budget to measure the companies success.

For example: Lets say a manger is trying to determine the amount of electricity being used for his gaming supplies for his Eteam. the cost per setup is $25. The fixed cost is $15,000. The hours per month vary between 1000-4500.

The monthly expense = 15,000 + (20 x Machine hours)

January - 1,000 hrs

February - 2500 hrs

Month of January - $15,000 + (20 x 1000) = 35,000

Month of February - $15,000 + (20 x 2500) = 65,000

With the feedback from this we can determine that the flexible budget changes when the machine hours also varys.