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Budgeting & Forecasting › Flexible Budgets

What is a flexible budget?

Beginner

Answer

A flexible budget is one that adjusts (flexes) to the actual level of activity achieved, recalculating variable costs at that volume while keeping fixed costs constant. It provides a fair benchmark for comparing with actual results, unlike a fixed budget set for a single planned volume.
Real-world example The budget is re-computed at the actual 12,000 units before comparing spend, so volume differences don't distort it.

Common follow-ups: How does it differ from a fixed budget? | Why is it better for control?