ACC 550 Cost Accounting Module 4-1 Discussion Another Take on Flexible Budgets and Variance Analysis Comprehensive Variance

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ACC 550 Cost Accounting Module 4-1 Discussion Another Take on Flexible Budgets and Variance Analysis

Comprehensive Variance Analysis Based on Ex Post Optimal Budget. The author presents a new framework for flexible budgeting, cost of capacity, and inventory variance analysis. He suggests the use of an optimal ex post flexible budget instead of the traditional flexible budget. He also suggests the use of practical capacity instead of budgeted capacity.

As you read, consider the following questions:

• What is an optimal ex post flexible budget?

• How does an optimal ex post flexible budget differ from a traditional flexible budget?

• What is meant by the term practical capacity?

• How do practical capacity and budgeted capacity differ?

Once you have considered these questions, respond to the following question in your initial post: Would this new framework provide better variance analysis? Present an argument for or against the new proposed framework, and support your argument with specific examples.

When responding to two of your peers, identify strengths and/or weaknesses in their argument. If you agree with their argument, point out the items you agree with and provide support for their position. If you disagree with their argument, explain why you disagree and provide support for your position.