A static budget is a projection of budget data at one level of activity. These budgets do not consider data for different levels of activity. As a result, companies always compare actual results with budget data at the activity level that was used in developing the master budget.
“A static budget is a type of budget that incorporates anticipated values about inputs and outputs that are conceived before the period in question begins.”
These budgets are used by finance professionals, accountants, and the management teams of businesses trying to measure the financial performance of a business over time.
A static budget refers to a form of the budget that forecasts expected or anticipated expenses and revenues for a period that has not started yet. The numbers in this budget don’t change, even if real expenses or revenues during that period vary from the budgeted figures.
Static budget reports are useful in evaluating the progress toward planned sales and profit goals. They are also appropriate in assessing a manager’s effectiveness in controlling costs when (a) actual activity level, and /or (b) the behavior of the costs in response to changes in activity is fixed.
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