Static budget
Static budget is a financial plan drawn up before a period using one assumed level of activity. It remains unchanged throughout the period, even when actual output or sales differ significantly from the plan.
Also known asfixed budget
FrameworkFlexible budgeting
See it move
A side-by-side comparison places the static budget on the left — 1,000 units assumed, material cost €5,000, no mid-period adjustment — against actual results on the right: 1,200 units achieved, material spend €5,800. The apparent gap is €800, which looks unfavourable, but €1,000 of that gap is explained purely by the extra 200 units produced; adjusting for volume shows the operation was actually €200 favourable on a like-for-like basis. The comparison explains why a static budget is an unreliable performance benchmark whenever actual output differs from the plan.
Check yourself
A manufacturer budgets material costs of €50,000 based on planned production of 10,000 units. Actual production is 12,000 units and actual material costs are €58,000. A manager compares actual cost to the static budget and reports an €8,000 adverse variance. Why is this comparison misleading for performance evaluation?