Explain the difference between a static budget and a flexible budget..
Dave Kellerman and his crew turned out 20,000 fans during the month a remarkable feat given that the firms manufacturing plant was closed for several days because of storm damage and flooding. Kellerman was especially pleased with the fact that overall financial performance for the period was favorable when compared with the budget. His pleasure, however was very short lived as Johnsons general manager issued a stern warning that performance must improve and improve quickly, if Kellerman had any hopes of keeping his job.
1. Explain the difference between a static budget and a flexible budget.
2. Which of the two budgets would be more useful when planning the companys cash needs over a range of activity?
3. Prepare a performance report that compares budgeted and actual costs for the period just ended(report that Kellerman likely used when assessing his performance).
4. Prepare a performance report that compares budgeted and actual costs for the period just ended( report that the general manager likely used when assessing Kellermans performance).
5. Which of the two reports is preferred? Should Kellerman be praised for outstanding performance or is the general managers warning appropriate? Explain, citing any apparent problems for the firm.
Explain the difference between a static budget and a flexible budget.
