Budget types

Flexed budgets are effectively the same as flexible. A flexed budget is where we re-write the budget based on the actual level of activity (i.e. actual sales and actual production). We need to do it for variance analysis.

Rolling budgets are budgets prepared every month, for the following 12 months.

They are examinable (otherwise they would not be in the Course Notes!)

Flexed budgets are useful for controlling costs. There is no point in comparing actual costs with the original budget costs because obviously if we produce more or less units that in the original budget, we would automatically expect to spend more or less on materials etc.. If we are checking how well the managers have done we should compare the actual results with the flexed budget.

Rolling budgets have the advantage of always being more up to date (because they are prepared each month) and also tend to be better prepared because the budgeting becomes part of the normal work of the people involved. It does mean more work (doing it every month instead of just once a year) but it actually only involves updating 11 months and adding 1 extra month.