---
title: "Flexible budget"
description: "What a flexible budget is, how it differs from a static budget, how to split variances into sales volume and flexible budget variances, with a worked example."
canonical: https://ledgeriano.com/glossary/flexible-budget
language: en
publisher: "Ledgeriano"
updated: 2026-11-06
---

# Flexible budget

> What a flexible budget is, how it differs from a static budget, how to split variances into sales volume and flexible budget variances, with a worked example.

A flexible budget restates the original budget for the level of activity actually achieved. Revenue and variable costs are recalculated at actual volume using budgeted rates, while fixed costs stay at the planned amount. Comparing actual results with it separates the effect of selling more or less than planned from the effect of prices and spending.

A static budget comparison mixes two different stories. If you sold 10% more than planned, costs will naturally be higher than budget; that is not overspending. The flexible budget asks what costs should have been at the volume you actually achieved.

The total variance from the static budget then splits in two. The **sales volume variance** is flexible budget profit minus static budget profit: the effect of volume alone. The **flexible budget variance** is actual profit minus flexible budget profit: the effect of selling prices, cost rates and spending, which can be broken down line by line.

Ledgeriano builds flexible budgets on revenue or units sold and reports sales volume and spending variances alongside budget vs actual by account, cost center and project. The [management accounting guide](https://ledgeriano.com/guides/management-accounting) and the [budget template](https://ledgeriano.com/templates/budget-template) show the layout.

```
Flexible budget cost = Fixed costs + Variable cost per unit × Actual units
Sales volume variance = Flexible budget profit - Static budget profit
Flexible budget variance = Actual profit - Flexible budget profit
```

## Example: 10,000 units planned, 11,000 sold

Budget: price 20, variable cost 12 per unit, fixed costs 50,000.

|  | Static budget (10,000) | Flexible budget (11,000) | Actual (11,000) |
| --- | --- | --- | --- |
| Revenue | 200,000 | 220,000 | 216,000 |
| Variable costs | 120,000 | 132,000 | 140,000 |
| Fixed costs | 50,000 | 50,000 | 52,000 |
| Profit | 30,000 | 38,000 | 24,000 |
| Variance |  | 8,000 F (volume) | 14,000 U (flexible budget) |

### When should I use a flexible budget?

Whenever activity differs from plan and you want to judge cost control fairly, especially for production departments and variable selling costs.

### Does a flexible budget change fixed costs?

No. Fixed costs stay at the budgeted amount within the relevant range; only revenue and variable costs are restated for actual volume.

Guide: https://ledgeriano.com/guides/management-accounting