To compute the value of the flexible budget, multiply the variable cost per unit by the actual production volume. Here, the figure indicates that the variable costs of producing 125,000 should total $162,500 (125,000 units x $1.30).

What is a flexed budget?

Accounting professionals should be able to 'flex' budgets. This process means changing a budget to allow for different sales levels and allows more realistic variance analysis at the end of the financial period in question. The reason it is more realistic is because it is a more 'like for like' comparison.

What is flexible budget example?

Example of a Flexible Budget

ABC Company has a budget of $10 million in revenues and a $4 million cost of goods sold. Of the $4 million in budgeted cost of goods sold, $1 million is fixed, and $3 million varies directly with revenue. Thus, the variable portion of the cost of goods sold is 30% of revenues.