Budgeting & Forecasting › Flexible Budgets
How does flexible budgeting apply to a budget with multiple activity levels and step costs together?
AdvancedAnswer
Combine linear variable flexing within each step range with recognition of step-cost jumps at thresholds: for the actual activity level, apply the variable rate and add the fixed cost appropriate to that step. Presenting a flexible budget across levels shows where step costs increase, giving a realistic allowed cost at each level.
Real-world example The flexible budget table shows costs jumping at the volume where a second shift's supervision is added.