Deficiencies of the Static Planning Budget

Deficiencies of the Static Planning Budget

To illustrate the difference between a static planning budget and a flexible budget, consider Rick’s Hairstyling, an upscale hairstyling salon located in Beverly Hills that is owned and managed by Rick Manzi. The salon has very loyal customers—many of whom are associated with the film industry. Recently Rick has been attempting to get better control of his revenues and costs, and at the urging of his accounting and business adviser, Victoria Kho, he has begun to prepare monthly budgets. Victoria Kho is an accountant in independent practice who specializes in small service-oriented businesses like Rick’s Hairstyling.

At the end of February, Rick prepared the March budget that appears in  Exhibit 9–1 . Rick believes that the number of customers served in a month is the best way to measure the overall level of activity in his salon. He refers to these visits as client-visits. A customer who comes into the salon and has his or her hair styled is counted as one client-visit

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