ACC 556 Week 6 Discussion – Budgeting

Please respond to the following:

• Compare and contrast a flexible budget and a static budget. Recommend which budget would be appropriate for Apple Inc. Provide support for your recommendation.

Be sure to respond to your classmate’s (Sheree) posts:

Hello everyone,

A static budget is one that is prepared based on a single level of output for a given period. The master budget, and all the budgets included in the master budget, are examples of static budgets. Actual results are compared to the static budget numbers as one means to evaluate company performance. However, this comparison may be like comparing apples to oranges because variable costs should follow production, which should follow sales. Thus, if sales differ from what is budgeted, then comparing actual costs to budgeted costs may not provide a clear indicator of how well the company is meeting its targets. A flexible budget created each period allows for a comparison of apples to apples because it will calculate budgeted costs based on the actual sales activity.

As for Apple, a flexible budget is most recommendable. This is because it helps management to adjust its budgets based on level of activity and investors and executives can control movements in operating costs within a business cycle, hence attaining maximum performance. Apple will benefit from using a flexible budget. enables Apple to accommodate its costs and needs as factors reflect either favorable or unfavorable variances during the accounting period. This could be an increased demand for goods and services or a temporary labor cost hike.