Fixed vs flexible budget. Difference Between Fixed Budget and Flexible Budget (with Comparison Chart) 2022-11-06
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The pigeonhole principle, also known as the "boxes and pigeons" principle, is a simple but powerful concept in mathematics that states that if there are more objects than available spaces (or "pigeonholes"), then at least one space must contain more than one object. This principle has many applications in various fields, including computer science, economics, and even daily life.
One of the most common applications of the pigeonhole principle is in computer science, specifically in the field of data compression. In data compression, the goal is to represent a large amount of data using a smaller number of bits. One way to do this is by using a technique called "lossless compression," where the original data can be recovered exactly from the compressed version. The pigeonhole principle can be used to prove that certain lossless compression schemes are optimal, meaning that no other scheme can compress the data more efficiently. For example, suppose we have a set of data consisting of the letters A, B, C, and D. If we want to represent this data using only 2 bits per letter, we can use the pigeonhole principle to prove that at least one of the letters must be represented by two different combinations of 2 bits. This means that the data cannot be losslessly compressed using 2 bits per letter, and we must use a different method or a higher number of bits to achieve optimal compression.
Another application of the pigeonhole principle is in economics, specifically in the study of market equilibrium. Market equilibrium occurs when the quantity of a good or service that is being supplied is equal to the quantity that is being demanded. The pigeonhole principle can be used to prove that under certain conditions, market equilibrium is always possible. For example, suppose we have a market for a certain type of good, and there are three sellers who each have a certain number of units of the good to sell. The pigeonhole principle states that if the sellers have a total of more than three units of the good, then at least one of them must have more than one unit to sell. This means that there must be at least one buyer who is willing to purchase more than one unit of the good, which is necessary for the market to reach equilibrium.
In daily life, the pigeonhole principle can also be used to solve practical problems. For example, suppose you have a group of friends who are going on a road trip, and you need to decide which car to take. You have three cars to choose from, each with a different number of seats. The pigeonhole principle states that if you have more friends than the total number of seats in the three cars, then at least one of the cars must have more than one person in it. This can help you decide which car to take, and also serve as a reminder to carpool to save space and reduce environmental impact.
In conclusion, the pigeonhole principle is a simple but powerful concept that has many applications in various fields, including computer science, economics, and daily life. Its versatility and simplicity make it a valuable tool for solving a wide range of problems.
Difference Between Flexible Budget and Fixed Budget
For the most accurate information, please ask your customer service representative. Variable expenses will not exist at zero levels of activity. Flexible budgets calculate, for example, different levels of expenditure for variable costs. Then you would decide how much money should be allocated to each part based on your assessment. Meaning A fixed budget is a budget that remains static irrespective of the activity level.
Zero-based budgeting is basically starting from zero on each budget, and then justifying all relevant needs and costs for the new budget. This type of budget is typically used in businesses where costs are relatively stable and predictable. The expenses categorized into fixed, variable, and semi-variable costs. A couple of weeks into development, the client decides on a new feature, which immediately shakes up the set requirements, scope and timelines. So, he argued that his performance was even better and his performance evaluation would only be fair if the original budget is adjusted for the actual level of activity. It will adjust the elements of costs in proportion to the output generated. Imagine the project is thoroughly and specifically defined and developers get to work.
FIXED & FLEXIBLE BUDGET in Accounts and Finance for Managers Tutorial 06 January 2023
In this article, I will walk you through the difference between fixed budget and flexible budget. It can optimise processes and mean you get the best bang for your buck, with visibility over each phase of development as it happens and the ability to make changes at any time. Fixed Budget is best suited for the organisations where there are fewer chances of fluctuations in the prevailing conditions or if the organisation is not influenced by the change in the external factors and the forecasting can be done easily to give close results. The performance of the managers is measured based on the achievement of targets and plans at the end of the budget period. Variable manufacturing overhead variance has two distinct variances. For instance, commission costs may be fixed up at 2% of sales effected. Comparative Table Basis for Comparison Fixed Budget Flexible Budget 1.
Difference Between Fixed Budget And Flexible Budget(With Table)
Since it operates on a single activity level, it requires less time to prepare than a budget plan that considers different activity levels. It changes along with the increases and decreases in the activity level. The details underlying the profit plan are contained in departmental sales and cost budgets, each part identified with the executive or group responsible for carrying it out. It is designed to change in accordance with changes in external and internal conditions. Thus, during times of unexpected economic changes the actual scenario may turn out to be different from what is laid out in a fixed budget. Under variable costing, only the quantity of units sold drives operating income, the production level has no impact at all.
Quite flexible, almost every fluctuation is taken into account. You will have to plan ahead for your likely costs and, thus, you will have the budget and tools in place for your team when you need them. For example, consider the hardware and software needed to complete the project and the costs associated with each. Experience the value of a well-planned budget that aligns with your strategy for the following year. A Rolling budget is kept continuously updated with each budgeting period expiring.
Difference Between Fixed and Flexible Budget (Top 9)
Cost Ascertainment is also not possible in case of fixed budget if the actual and budgeted levels of activity vary and the same can be easily determined in the case of a flexible budget. Who the payer is in that scenario will affect how much of a hit the hospital takes. Flexible vs flexed budget Flexible budgeting happens at the beginning of a budgeting period—revenue, costs, and profit are forecast across a range of activity levels. This means the kickoff phase is drawn out while the details are agreed. Your rent remains the same each month, so you can predictably budget for it without having to worry about constant variances in cost.
Breaking Down Your IT Budget: Fixed vs. Flexible Costs
In contrast, intensity measures fail to adjust for the fixed and variable components of sustainability aspects and do not provide an accurate indication of the actual change in efficiency. This is the budget facilitates not only to have comparison in between various levels of production but also to identify the level of lowest production cost. When accounting for the end of a production cycle's actual expenses, the static budget variance needs to be combined with the actual initial static budget in order to achieve accurate financial reporting. On the contrary, Flexible Budget can be understood as the budget created for different production levels or capacity utilization, i. Even if you have bring-your-own-device policies, you likely still supply technology such as servers and in-office devices. A fixed budget is a type of budget that does not change based on sales or other factors.
The fixed cost spending variance is the difference between the amount of fixed cost shown on the flexible budget and the actual amount of fixed cost. But it is also important to measure their performance on a fair basis. In the simplest terms, a flexible budget can be described as an end of period actual accounting of expenses on which to form a comparison with the original static budget. Costs are categorized into three types: Fixed costs: Fixed costs are primarily concerned with the passage of time and are unrelated to the degree of production or sales volume. Conclusions By comparing the fixed and flexible budgets, we get an idea about which one is more useful and applicable. Unlike fixed budgets, when a flexible budget is used, the actual cost of actual volume is compared with the budgeted cost of actual volume, i. What is a Fixed Budget? If, however, the manager is the Chief Executive Officer, the entire income statement should be used in evaluating performance.
Fixed budgets and flexible budgets are different from each other in terms of the complexity in preparation, and business scenario that is mostly suited for each. This is where real issues can show up. It allows for faster progression, easy introduction of amendments and new features and immediate management of risks as you go along. Flexible Budget vs Fixed Budget The preparation of a budget is essential for any business that wishes to keep its costs under control. It helps a business set goals for revenue generation. All information is subject to change.
There are a few key factors that influence app pricing: Functionality What function and purpose will the app serve for users? Meaning of flexible budget By identifying the distinction between fixed, semi-fixed, and variable cost, a flexible budget is designed to change in relation to the activity attained. See also What is Project Budget? When you calculate both variances, one is favorable and the other is not. Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data. Types Of Flexible Budget Some of the costs are fixed, e. The static nature of a fixed budget makes it easier to create. The actual results are then compared with the forecast or planned budgets to analyze the variance. See also What is a Capital Expenditure Budget? When production volumes change, fixed components of sustainability aspects cause intensity measures to change even when there is no change in aspect efficiency.