question archive Substantive responses to at least two peers · Ask at least one question in response to an original peer post that you would like the author to explore further

Substantive responses to at least two peers · Ask at least one question in response to an original peer post that you would like the author to explore further

Subject:BusinessPrice: Bought3

Substantive responses to at least two peers

· Ask at least one question in response to an original peer post that you would like the author to explore further.

 

CARMEN’S POST:

Fixed versus Flexible/ Variable Expenses

Evaluate how fixed and variable costs can differ based upon the industry

 Fixed and Flexible/ Variable expenses play a major role in budgeting. It is important to understand the difference as they impact the budget differently. According to Sclatter (1945) he defines Flexible/ variable as “activity cost” because the coast can go rise or fall depending on the activity (p. 157). On the other hand, fixed expenses are more consistent, however the expense can increase or decrease but at a slower rate than a flexible expense.  According to BPMSG (2010), example of fixed expenses can be rent, electricity, and water. This week video by McCarthy (2010) did a wonderful job explaining how rent which is a month to month or lease is consistent however, the sale of coke drink can very depend on sale. For example, one day you can sell let’s say 10 can and the next day you can sell 20. With Flexible variable expenses there is a drastic increase or decrease depending on the volume and variable of sale (McCarthy, 2010). An example of flexible expense would be grocery as it varies every time we might go grocery shopping. In evaluating fixed and variable cost can differ based on industry. There are some industry that require more space and there for pay more rent than a smaller industry. The amount of personnel and staff can differ which require different expenses.

 Which would you prefer to have more of in terms of expenses (fixed or flexible)? Provide rationale for your choice.

To me this is a hard question as fixed expenses benefit in the outgoing of expenses. It is nice to know what is coming out month to month with no change, however, flexible expenses are also important as they build on revenue for the organization. To me they both are important and prefer. I would both as they keep the organization going and making revenue. Maybe I need to look more into semi-cost which utilizes both expenses. For the sake of this question, I would say flexible expenses as it will generate revenue to the organization. According to Willson (2014) fixed cost cannot be used to bring in revenue or pay other bills. Fixed expenses are limited and obligated.

References

BPMSG, [BPMSG]. (2010, February 23). 06 Operating Expenses Fixed and Variable (Business Performance Management) [Video File]. Retrieved from  https://youtu.be/Xc6F5rMCM40  (Links to an external site.)  (Links to an external site.) 

McCarthy, J., [goldstarjimmccarthy]. (2010, September 1). Difference Between Fixed and Variable Costs - Quick Draw with Jim McCarthy, Goldstar CEO [Video File]. Retrieved from  https://youtu.be/wBBfA9q8FSQ  (Links to an external site.) 

Schlatter, C. F. (1945). Fixed Expense. Accounting Review20(2), 156.

Willson, T. (2014). Finding Budget Flexibility - or Not: The Impact of Fixed and Variable Cost. Armed Forces Comptroller59(2), 31–34.

 

TIFFANY’S POST:

Fixed versus Flexible/Variable Expenses

 

This week’s discussion post focuses on Fixed versus Flexible/Variable Expenses.  Which simply means that from a basic standpoint fixed expenses do not change or fluctuate over time and flexible expenses do. For instance, if we were looking at a personal budget a fixed expenses would be car payment, insurance, rent or a mortgage. An example of a flexible/variable expenses which could change month to month or week to week depending on when these expenses would occur could be something like food, or other household expenses. Now when it comes to a business, they too have fixed expenses they are required to pay each month. A business fixed expenses could be the cost related to renting a location or the mortgage of the location that they are utilizing for their business. For some companies, their employees’ salaries are categorized as a fixed expense. Fixed expenses help an organization plan for the next year’s budget. Now when it comes to a business’s flexible/variable expenses these can change month over month. Sometime this changes week over week. With a business their flexible/variable expenses are related to the number of goods that they produce or the number of services that offer during that specific period. Now for a business that has certain periods of times that they are busy and then certain periods of time when they are slower, they most time will recognize that the number of variable expenses will correlate to that specific time. For example, during a busy time the variable expenses will increase because it takes more to procedure your goods or services and when you are slower those expenses decrease.  This is why flexible/variable expenses are more beneficial to a business then fixed expenses and why for a business they would want to have more variable expenses then fixed expenses.  Tabbush (2018), mentions that the more fixed costs a company has, the more revenue a company needs in order to break even, which means it needs to work harder to produce and sell its products. That is because these costs occur regularly and rarely change (Tabbush, 2018).

 

 

Tabbush, V. (2018). Understanding Costs: How CBOs Can Build Business Acumen for Future Partnerships. Generations42(1), 61–64

 

Substantive responses to at least two peers

· Ask at least one question in response to an original peer post that you would like the author to explore further.

Jo’s post:

Discuss how you would justify a budget’s fixed and flexible expenses to a board of directors or grant funding agency.

When presenting the budget’s expenses whether fixed or flexible there should be justification for those expenses per item. When proposing your budget the board or funding source needs to have a clear understanding of how funds are being used.  Dropkin, Halpin, & LaTouche (2007) suggests that some justifications may require a more narrative detailed approach, these descriptions could range calculations and clarifications of significant surges and loss. The budget should have justification for how the implemented fixed or variable expenses will improve the program and or organization.

What negotiation or conflict resolution strategy would you recommend if the board or agency does not accept the initial justification? 

When addressing the board with the budget you would want to show how the budget relates to the organizational needs. Rani & Sharma (2010) suggests providing a means for measuring and recording fiscal success with the objectives of the organization. By demonstrating sound financial management through focusing more on the requirements of the organization as well as the funding source. The justifications should meet the needs of the community being served as well as how they support the goals of the organization or program.

 

References

 Dropkin, M., Halpin, J., & LaTouche, B. (2007).  The budget-building book for nonprofits  (2nd ed.). Jossey-Bass. 

Rani, R., & Sharma, R. K. (2010). Nursing administration: Financial management and budgeting. International Journal of Nursing Education2(2), 42–47.

 

LESLEY’S POST:

Discuss how you would justify a budget’s fixed and flexible expenses to a board of directors or grant funding agency.

Justifying the fixed and/or variable expenses in a budget should be very straight forward and direct, as each line item should be tagged with its purpose. Utilities should be labeled as such, as well as things such as payroll, office supplies, travel, etc. Times may occur in which irregular items must be purchased but the person whom determines the need should easily be able to categorize these expenses as well, and if no category exists, this should be implemented into the budget factors as this could potentially becomes something needed again in the future.  As with the Romanians Tax Review (2017) there should be adequate documentation to provide enough justification for services and expenses, and this practice should prove less work on the backside as long as steps are taken on the front end for expenses.

What negotiation or conflict resolution strategy would you recommend if the board or agency does not accept the initial justification?

I feel the proper resolution to a board or agency, should an expense not be accepted, would be the proper explanation. Here in Texas, we have what is called the TexFlex card (many states and organizations have their own form of this), which is issued by the state through my husbands job that allows us to pay for appropriate medical expenses, tax free. Since the Covid pandemic, TexFlex has cracked down tremendously on justifying purchases with this card. I paid for services at an organization with the name of “Example-Medical Center”. TexFlex kicked back for needing more information on the payment which means I had to request a line-item bill from the organization to submit rather than the typical credit card receipt which is supplied at the time of service. While from my side, the submitted document says “MEDICAL CENTER”, why is this even a question as to whether or not it is acceptable, but it is, and it is a pain to deal with. There are even times when the second receipt is kicked back and my husband has to call the service desk and explain what the conditions are that required the service before they will go ahead and process as cleared. Not to mention that if you do not supply them with the adequate documentation to absolute satisfactory, they put a hold on your TexFlex card and you cannot use it. I feel like this is way overboard, but I’m not the one over there making these rules.

Reference

Romania: Tax inspections and justifying documentation for service expenses. (2017, July 1). International Tax Review.

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