flexible budget

Flexible budget

A budget that shows how costs vary with different rates of output or at different levels of sales volume and projects revenue based on these different output levels.

Flexible Budget

A budget that considers different levels of production or sales. A flexible budget makes different amounts available to departments depending on what production or sales are realized. For example, a flexible budget may make 6% more money available to its research and development department if its revenue increases 6%.

flexible budget

a BUDGET that is designed to change in accordance with the level of activity actually attained, so that it allows for the variation in COSTS associated with changes in output volume. The costs associated with running a manufacturing plant, for instance, at 50% of capacity are different from running it at 70% or 100% capacity. The budget must allow for variation in plant utilization by distinguishing between FIXED COSTS, VARIABLE COSTS and SEMI-VARIABLE COSTS and their relationship to output. Flexible budgets facilitate more appropriate comparisons between the actual costs associated with the output attained and the budgeted costs for that output level. See BUDGETING, BUDGETARY CONTROL.