Final Answer:
The given statement "A variance analysis using a flexible budget helps differentiate changes that result from managerial factors, as opposed to changes that result from volume forecast errors" is true.
Step-by-step explanation:
A flexible budget adjusts for changes in activity levels and allows for a more accurate evaluation of managerial performance by isolating the impact of managerial decisions. When actual results deviate from the flexible budget, variances are identified. Variances can be categorized into two main types: flexible budget variances and volume variances. Flexible budget variances arise from changes in cost and revenue structures due to managerial decisions, while volume variances result from differences between the actual and expected activity levels. By analyzing variances, management can identify areas where performance differs from expectations and pinpoint whether the variations are due to controllable managerial decisions or external factors such as volume forecast errors.
Managers use variance analysis to assess their performance in controlling costs and achieving revenue goals. If the variance is favorable, indicating that actual results are better than the flexible budget, it suggests effective managerial decisions. Conversely, an unfavorable variance may signal areas that require attention or adjustments in managerial strategies. In essence, a variance analysis using a flexible budget serves as a valuable tool for performance evaluation, helping organizations make informed decisions to improve efficiency and effectiveness in their operations.
In summary, utilizing a flexible budget for variance analysis enables organizations to distinguish between changes influenced by managerial decisions and those resulting from volume forecast errors. This distinction is crucial for effective performance evaluation and decision-making in managerial accounting.