What Is a Flexible Budget?

Flexible budget is also called variable budget, which usually changes with the sales volume change, mainly used for expense budget. The basic idea is to formulate a fixed budget and a variable budget according to fixed costs (expenses that do not vary with output within a certain range) and variable costs (expenses that vary with output) to ensure budget flexibility. Variable expenses are mainly controlled based on unit costs, and fixed expenses can be controlled by amounts. ^[1]

Flexible budget

Flexible budget is also called variable budget, which usually changes with the sales volume change, mainly used for expense budget. The basic idea is to formulate a fixed budget and a variable budget according to fixed costs (expenses that do not vary with output within a certain range) and variable costs (expenses that vary with output) to ensure budget flexibility. Variable expenses are mainly controlled based on unit costs, and fixed expenses can be controlled by amounts. ^[1]

It is precisely because this kind of budget can reflect the expenditure control number of each business volume level with the change of business volume, and has a certain flexibility, so it is called "flexible budget".

Use flexible budget method to compile

The steps for preparing a flexible budget are as follows:

Select and determine the measurement unit consumption, labor hours,

Flexible budget

Evaluation and assessment of flexible budgets using a multi-level approach

This method is suitable for various project expenditures that change with the business volume ^[2] , such as the purchase of goods in schools. Since the enrollment scale of students varies greatly, it can be calculated according to the budgeted annual plan for the number of students and the number of students The number of desks, stools, beds, protective repairs for teaching buildings or other procurement items should be added.

In management science, flexible budget is mainly used to prepare cost budget and profit budget.