Static Budget

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DEFINITION

A type of budget that incorporates anticipated values about inputs and outputs that are conceived before the period in question begins. When compared to the actual results that are received after the fact, the numbers from static budgets are often quite different from the actual results.

INVESTOPEDIA EXPLAINS

When the static budget is compared to other facets of the budgeting process (such as the flexible budget and the actual results), two types of variances can be derived:

1. Static Budget Variance: The difference between the actual results and the static budget

2. Sales Volume Variance: The difference between the flexible budget and the static budget

These variances are used to assess whether the differences were favorable (increased profits) or unfavorable (decreased profits).


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