flexible budget

A flexible budget is a financial plan that adjusts projections based on actual business activity levels, such as sales or production volume. Unlike a fixed budget, which remains unchanged regardless of real-world changes, a flexible budget provides a more accurate picture of costs and revenues by reflecting the current operational conditions. This helps managers analyze performance more effectively, identify variances, and make informed decisions. Essentially, it serves as a dynamic financial tool that adapts to varying levels of activity, improving overall planning and control.