Explain the Difference Between a Static Budget and a Flexible

question 23

Essay

Explain the difference between a static budget and a flexible budget. Explain what is meant by a static budget variance and a flexible budget variance.

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Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual units of production, based on a specific activity (e.g., labor hours or machine hours).

Labor Price Variance

The difference between the actual cost of labor and the budgeted or standard cost, often analyzed in cost accounting.

Standard Rate

A predetermined cost or price that is established for accounting or budgeting purposes, often used in costing and financial analysis.

Actual Hours

The real number of hours worked, as opposed to planned or estimated hours.