All 34 Flexible Budgets questions
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Budgeting & Forecasting › Flexible Budgets

What is the difference between a static budget variance and a flexible budget variance?

Intermediate

Answer

The static budget variance is the total difference between actual results and the original fixed budget. It decomposes into the sales-volume variance (static vs flexible budget) and the flexible-budget variance (flexible budget vs actual). This split separates the effect of volume from the effect of price and efficiency.
Static variance = Sales-volume variance + Flexible-budget variance.
Real-world example The overall difference from the original budget is split into volume and controllable-performance parts.

Common follow-ups: What two variances sum to the static variance? | Why decompose it?

Variance Analysis Types of Budgets Flexible Budgets
All 34 Flexible Budgets questions