What is a Flexible Budget?

A flexible budget shows budget figures for different activity levels.

 This means actual performance can be compared to the budget figures of the same level of activity.

X   If actual activity levels are not compared to a budget with the same activity, the budget comparison is not meaningful.

Apples are compared to oranges not apples!

To do a flexible budget, expenses (costs) are classified into fixed and variable.


  • fixed expenses – are the same across different activity levels, and
  • variable expenses – vary for different activity levels.

To show you this, follow this example.

The example shows the budget for 100,000 units can be reset to 110,000 units to match actual activity.

flexible budget

This shows you how to calculate the new variable costs across the ranges of 100,000, 110,000 and 120,000 units.

This example shows how the actual performance level is compared to the recast flexible budget of the same activity.

flexible budget example


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June 10, 2019
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