Read the introduction to Chapter 10. When you have finished, click on the link at the top right to read the next section. Rarely will the assumptions of the master budget be completely accurate. As a result, organizations use a modified budget called a flexible budget. A flexible budget is a revised master budget based on the actual activity levels. The flexible budget represents what costs should be – based on the actual levels of sales/activity. In this unit, the text assumes beginning and ending finished goods inventory are the same and therefore units produced and sold will be the same.
As you read this Section follow along with how Jerry’s Ice Cream handles a doubling of expected sales -- sweet news! The summer was hotter and longer than usual! As they modify their master budget, follow along with the budget you created in Excel and modify it. as well, but keep your mater budget intact. All you have to do is save a copy of the master file with a different file name.