A flexible budget and a static budget are two different types of budgets used by organizations to manage their finances. A static budget is one that remains unchanged regardless of the level of activity or output. It is generally used in businesses where production levels remain consistent throughout the year, such as manufacturing companies whose output does not fluctuate significantly from month to month. A flexible budget, on the other hand, is one that changes depending on certain predetermined factors such as sales volume or production output. Flexible budgets are often used in businesses where there can be significant fluctuations in activity during different parts of the year (Kumar & Kumar, 2011).
Static budgets provide an effective way for organizations to plan expenses and revenues based on anticipated performance levels over a specific period of time. They allow managers to create cost categories so they can easily track how much they have spent on each item and compare it with how much was actually spent at the end of the period (Gwartney et al., 2008). Static budgets also provide an easy way for managers to analyze how costs vary within a given category over time and make adjustments accordingly if needed. Furthermore, since these budgets are fixed and unchanging, it gives managers more control over their spending decisions since they know exactly what their expenditure will be each month or quarter.
Compare and contrast a flexible budget and a static budget. Recommend which budget would be appropriate for Apple Inc.
Flexible budgets enable organizations to respond quickly to changing conditions in terms of both revenue and expense projections (Wahyuni & Boediono, 2018). This type of budget allows them to adjust their spending according to current market conditions so they can maximize profits while minimizing losses due to fluctuating demand or unexpected events such as natural disasters. Additionally, flexible budgets help organizations monitor their actual performance against planned goals which helps improve decision-making processes (Vasudevan & Sankaralingam 2017). Finally, unlike static budgets which involve setting long-term financial targets for a set amount of time before being revised again; flexible budgets allow for frequent revisions based on changes occurring throughout the year which makes them suitable for dynamic environments like retail stores where product demand fluctuates regularly.
Given its business model which involves producing hardware products with varying sales volatility across different sectors depending on economic conditions; I recommend Apple Inc use a flexible budget going forward instead of relying solely upon a static approach when making financial plans. The dynamic nature associated with tech related markets combined with how new releases could impact consumer buying behaviour highlights why this would be beneficial (Gomes et al., 2015). In addition; utilizing this type of approach would enable Apple Inc’s finance team to better analyse current trends/circumstances in order identify any potential issues before investing additional resources into particular areas thus reducing operational risk associated with outdated forecasts/figured produced using traditional methods .