Flexible budget

Flexible budget is a revised budget recalculated at the actual activity level achieved, rather than the level originally planned. The flexible budget isolates the effect of volume from price and efficiency differences.

Also known asflexed budget

ByHoang TruongUpdated June 30, 2026

FrameworkFlexible budgeting

See it move

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A side-by-side comparison shows a static budget at 4,000 hours alongside a flexible budget rescaled to 4,600 actual hours. The static budget totals €32,000 — €20,000 fixed overhead plus €12,000 variable at €3 per hour — while the flexible budget totals €33,800, keeping the same €20,000 fixed overhead but raising variable overhead to €13,800. With actual spend of €33,700, the true efficiency gap is just €100 favourable; the apparent €1,700 static variance was almost entirely volume-driven, not waste.

Where it fits

SubjectManagerial AccountingCoreTopicStandard Costing & Variance AnalysisCore

The formula

LaTeX

FB = TFC + (v \times Q_{\text{actual}})

Variables

$T F C$: Budgeted total fixed costs for the period (€)
$v$: Standard variable cost per unit of activity (€ per unit)
$Q_{a} c t u a l$: Actual activity volume achieved

Recomputes allowable cost at actual volume; comparing this to actual costs isolates price and efficiency effects