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Why is a fixed budget misleading for performance comparison? What is the relevant range and why does it matter for flexible budgets? What is the difference between a flexible budget and a rolling budget? What is the purpose of a flexible budget in performance evaluation? What activity measure should be used to flex a budget? How does a flexible budget improve on a fixed budget for cost control? 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?
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How do fixed costs behave when a budget is flexed?

Beginner

Answer

Fixed costs stay the same when flexing within the relevant range—they don't change with activity, so the flexed budget keeps them at the original budgeted amount. Only variable costs are recalculated for the actual activity level. (Step-fixed costs change only if activity crosses a step boundary.)
Real-world example When flexing from 10,000 to 12,000 units, rent stays fixed while material cost scales up.

Common follow-ups: Do fixed costs change when flexing? | What about step-fixed costs?

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All 34 Flexible Budgets questions