A static budget is a budget that allocates a fixed amount to the area or department that does not change irrespective of actual figures. For example, a bank has set an entertainment expense budget of $2500 a month. This is not changed irrespective the actual entertainment cost is above or below the limit.
The benefit of the static budgets is that it restricts the managers from overspending and allows them to monitor the performance in terms of targeted spending. Static budgets are widely used by finance controllers that have to achieve financial targets in terms of targeted returns. If the company has better control over its cash reserves it can decide to invest the idle cash and earn some returns.
In the case of management, static budgets are also used to gauge the performance of each department based on the savings or targets they have achieved.
At the beginning of the school year, Katherine Malloy decided to
Why are flexible budgets superior to static budgets for performance reporting?
At the beginning of the school year, Priscilla Wescott decided to
What adjustments should be made to static budgets before they are used
