All 34 Flexible Budgets questions
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What is meant by 'flexing' a budget? Give a simple example of flexing a budget. What is the allowed cost (budget allowance) in flexible budgeting? How do you prepare a flexible budget? What is the high-low method for splitting semi-variable costs? How does the flexible budget separate the volume variance from other variances? How are flexible budgets used for control reporting? 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?
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What is the difference between fixed, variable, and semi-variable costs in flexible budgeting?

Intermediate

Answer

Fixed costs stay constant regardless of activity within a range (rent). Variable costs change proportionally with activity (materials). Semi-variable (mixed) costs have both a fixed and a variable element (e.g., a phone bill with a standing charge plus usage). Flexible budgeting requires splitting mixed costs so only the variable part is flexed.
Real-world example A utility with a fixed standing charge plus usage is split so only the usage element flexes with volume.

Common follow-ups: What is a semi-variable cost? | Why must mixed costs be split?

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All 34 Flexible Budgets questions