Calculate a Flexed Budget Variance
Calculate a flexed budget and identify whether an overage is caused by higher volume or cost performance.
Original budget: 10,000 orders, $8 variable fulfillment cost per order, and $40,000 fixed monthly staffing. Actual month: 12,000 orders and $172,000 total fulfillment cost. The team needs to know how much of the overage is explained by volume and how much is true cost variance. Flexed budget = fixed cost + (actual volume x budgeted variable cost per unit). Performance variance = actual cost - flexed budget. The common trap is comparing actual spend to the static budget and calling the entire difference bad. That punishes teams for serving more activity and hides the true cost-control question. Static budget $40,000…
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