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.Continue Reading
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
A sales budget is important because it helps the company determine how much revenue it's expected to make on a product, how much the expenses will be and how many units will need to be produced for the period. Therefore, the sales budget serves as an important planning tool for the company overall. It can also help the company monitor its performance if the company compares actual sales to projected sales.Full Answer >
A direct labor budget is a specified number of production hours a company requires to achieve a desired level of production in a given period of time. A company may allocate 5,000 hours for production in a manufacturing division for a quarter, for instance.Full Answer >
Average total assets are calculated by adding together the value of assets at the beginning and end of an accounting period and dividing the sum by two, according to TheFreeDictionary. An accounting period is defined as the period of time reflected in the financial statements of businesses, usually a quarter or a year.Full Answer >
To use a profit-and loss template form, input all of the business sales and product costs to determine gross profits, and then subtract all of the expenses to determine the net profit for the period, states Dummies.com. Input the same information for previous periods to compare budgeted expenses and changes in sales.Full Answer >