All 34 Flexible Budgets questions
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Budgeting & Forecasting › Flexible Budgets

How do you separate fixed and variable elements of a mixed overhead for flexing?

Intermediate

Answer

Use cost-behavior techniques—account analysis, the high-low method, or regression—to estimate the fixed portion and the variable rate per unit of activity. Once split, only the variable element is flexed with activity, and the fixed element stays constant, producing an accurate flexed allowance for the mixed cost.
High-low: VC/unit = cost change / activity change; fixed = total - variable.
Real-world example The mixed maintenance cost is split via high-low so only its variable part flexes with output.

Common follow-ups: What techniques split mixed costs? | Which part is flexed?

Types of Budgets Variance Analysis Flexible Budgets
All 34 Flexible Budgets questions