Flexible (Variable) Budget Definition | Business Dictionaries from AllBusiness.com
Facebook Twitter Google+ You Tube RSS Feed
data-override-format="true" data-page-url = "http://www.allbusiness.com">

Business Glossary


Business Definition for: Flexible (Variable) Budget
Flexible (Variable) Budget

one based on different levels of activity. It is an extremely useful tool for comparing the actual cost incurred to the cost allowable for the activity level achieved. It is dynamic in nature rather than static. By using the cost-volume formula (or flexible budget formula ), a series of budgets can be developed easily for various levels of activity. A static (FIXED) budget is geared for only one level of activity and has problems in cost control. Flexible budgeting distinguishes between fixed and variable costs, thus allowing for a budget that can be automatically adjusted (via changes in variable cost totals) to the particular level of activity actually attained. Thus variances between actual costs and budgeted costs are adjusted for volume ups and downs before differences due to price and quantity factors are computed. The primary use of the flexible budget is for accurate measure of performance by comparing actual costs for a given output with the budgeted costs for the same level of output.

Copyright © 2005, 2000, 1995, 1987 by Barron's Educational Series, Inc., Reprinted by arrangement with Publisher.


Weekly Roundup

Sign up for our weekly Experts roundup, delivered to your inbox each Saturday morning.

Most Recent From our Experts

AllBusiness Experts

AllBusiness Greatest Hits


Real Business Owners, Real Business Advice!

Sign up for practical, real-world solutions from successful business owners delivered to your inbox each Saturday morning. FREE.