Flexible budget refers to a financial plan which is created for different activity levels and can be freely adjusted or even re-casted depending on the produced output. The flexible budget is practical and logical since the cost is readily determined at various activity levels (Reeves et al.,2014). In preparation of the flexible budget, the costs are divided into three main segments such as semi-variable, fixed and variable (Sullivan et al., 2014). Besides, semi-variable costs are further classified into a variable, and fixed price and then the budget is planned accordingly. For instance, a flexible budget is mainly suited for organizations with a high degree of variability in production and sales or even industries that can be easily affected by external factors as well as market condition fluctuations.

There are significant differences between fixed and flexible budget. For instance, a fixed budget refers to estimating pre-determined expenditures and incomes which once they are prepared there is no change with activity for the achieved levels. The first difference between flexible budget is classified according to variability nature while fixed is not categorized for their variability. Additionally, a fixed budget is inflexible and remains similar irrespective of business activity volume whereas flexible budget can be quickly re-casted for suiting changed conditions (Surbhi, 2015). Else, a flexible budget is designed for change according to activity level while the fixed budget assumes that circumstances remain to be static. Besides, in fixed budget costs cannot be determined if there is changing conditions while flexible values are readily ascertainable at different activity levels where the task of price fixing becomes easy (Zhao et al., 2013). Lastly, the flexible budget has many applications and can be used as a tool for effective cost control. On the other hand, in fixed cost all conditions remain unchanged is an unrealistic expectation on the part of management.

References

Reeves, A., McKee, M., Basu, S., &Stuckler, D. (2014). The political economy of austerity and healthcare: Cross-national analysis of expenditure changes in 27 European nations 1995–2011. Health policy, 115(1), 1-8.

Sullivan, S. D., Mauskopf, J. A., Augustovski, F., Caro, J. J., Lee, K. M., Minchin, M., … &Shau, W. Y. (2014). Budget impact analysis—principles of good practice: report of the ISPOR 2012 Budget Impact Analysis Good Practice II Task Force. The value in health, 17(1), 5-14.

Surbhi S (2015). Differences Between Fixed Budget and Flexible Budget. Retrieved from https://keydifferences.com/difference-between-fixed-budget-and-flexible-budget.html

Zhao, S., Chen, B., Zhu, P., & Príncipe, J. C. (2013). Fixed budget quantized kernel least-mean-square algorithm. Signal Processing, 93(9), 2759-2770.

Replying to Ashley Sanders

I agree with Ashley that strategic and operational planning has a significant influence on an organization although they serve different purposes. Strategic plan focuses on the entire organization meaning that it looks at the long-term goal and overall mission. On the other hand, operational planning focuses on organization portions since it focuses on the sections or departments as well as helping them to be successful while staying on the association mission. Lastly, Ashley indicates that strategic and operational planning are essential functions of organization management. Therefore, both plans should be performed at various management levels and focus on different organization aspects.

Replying to David Shelanskas

I agree with David that strategic planning refers to a statement of goals or missions which are required in offering organizational guidance and incorporates a set of activities or programs in which the resources are committed. David indicates the main difference between the two plans as that strategy is long term while operational is short term. The other difference is that strategic planning involves the governing body and executive management whereas operational plans include significant from the departmental management. The other difference consists of the process through which ideas are developed.

David indicates that strategic and operational plans are essential for large organizations. For instance, vital documents enable individual departments in working towards joint goals without understanding the other sections intricacies. On the hand, the operational department plan ensures informed department managers provides operational choices for an executive in creating the best near-term solution. Lastly, David concludes that it is frustrating working as middle management and not fully understanding the bigger picture.

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