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3 Examples of a Flexible Budget

 , updated on October 19, 2017
A flexible budget is a budget that changes according to business or activity volumes. This should not be confused with budget contingency that includes amounts for costs that are difficult to plan or predict. A flexible budget is a special kind of budget that includes fixed amounts and variable amounts that are based on a formula. The following are illustrative examples.

Sales

A sales team has a fixed budget of $1 million for salaries and expenses. The budget also includes a variable allocation of up to 8% of revenue for sales commissions.

Operations

A factory has a fixed budget of $2 million dollars for costs that are predictable such as rent. They also have a variable budget for labor, materials and electricity based on the units produced per month.

Strategy

A fashion brand wants to open up to 20 new locations in Asia. However, they only open a new shop when they can find a perfect location for the brand at a reasonable cost. The budget for the strategy is specified as up to $3 million per shop with a limit of 20 shops in the year.
Overview: Flexible Budget
Type
Definition
A budget that changes according to business or activity volumes.
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