All 34 Flexible Budgets questions
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What is the flexible budget variance? What is the sales-volume variance in the context of flexible budgets? What is the difference between a static budget variance and a flexible budget variance? What are the limitations of flexible budgeting? How can a flexible budget aid decision-making beyond control? How does flexible budgeting handle a budget prepared as a percentage of capacity? How do you separate fixed and variable elements of a mixed overhead for flexing? What is regression analysis for cost estimation and how does it improve on high-low? What is a step (stepped) fixed cost and how is it handled? How do you flex a budget with multiple cost drivers?
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Budgeting & Forecasting › Flexible Budgets

How does flexible budgeting interact with absorption vs marginal costing?

Intermediate

Answer

Under marginal costing, flexing focuses on variable costs and contribution, with fixed costs treated as a period lump sum. Under absorption costing, fixed overhead is absorbed per unit, so flexing and variance analysis include a fixed-overhead volume variance. The costing system affects how the flexed budget and variances are presented.
Real-world example The flexed statement under absorption costing shows an under-absorption of fixed overhead at lower volume.

Common follow-ups: How does marginal costing treat fixed costs when flexing? | What extra variance arises under absorption?

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All 34 Flexible Budgets questions