Flexible and Forecast Budget

Flexible and Forecast Budget
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Institutional Affiliation
Flexible and Forecast Budget
When would it make sense to use a flexible budget as compared to a forecast budget?
There are different types of budgets that an organization can use. The choice depends on the organization’s budgetary objectives. Two common types of the budget are flexible budget and forecast budget. Each of these two budgets has varying results, and hence an organization is required to make a decision on which one to use based on their expectations (Raiborn, Scott & Cluskey, 2007). As the name suggests, a flexible budget is one that integrates cost as per the organizational behavioral patterns as affected by other external and internal factors (Cleverley & Cleverley, 2018). On the other hand, a forecast budget is one that predicts the spending of an organization within a given period and does not keep on changing as per the emerging trends.
A flexible budget will best be used if expenses are expected to keep changing when the organization encounters small changes in its production and sales activities (Radu & Ciprian, 2015). With this budget, it will be possible for the company to adjust accordingly to accommodate the numerous changes and hence maintain its activities. It can increase or reduce production within the period depending on the various factors. Forecast budget, on the other hand, would make sense when the organization does not expect many changes in volumes and value within the period (Cleverley & Cleverley, 2018).

In such a case, it is possible to make predictions with some level of certainty. The management can make decisions on where they want the organization to be, and there is a high possibility that it will achieve it (Merchant, & Shields, 2003). The business environment and the organizational needs are the main factors that influence the organization in deciding whether it will use a flexible or a forecast budget.
References
Cleverley, W.O. & Cleverley, J.O (2018). Essentials of Healthcare Finance. Burlington, MA: Jones & Bartlett Learning
Merchant, K. A. & Shields, M. D. (2003). When and Why to Measure Costs Less Accurately to Improve Decision Making. Accounting Horizons. 7(2): 76-81.
Radu M. & Ciprian G. (2015). The Flexible Budget– Basic Tool Of The Management Control In The Economic Entities. Scientific Bulletin – Economic Sciences. Vol. 14(1): Pp. 3-10
Raiborn M. H., Scott R. C. & Cluskey G. R. (2007). Constructing Confidence Intervals For Flexible Budget Cost Estimates. Journal of Business & Economics Research. Vol. 5(10): Pp. 85-90