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6 May, 2015 - 17:10

When changing levels of production are build into budgets, the budgets are said to be flexible budgets. Costs are classified as

  1. fixed, which do not change with the production level,
  2. variable, which are tied to the production level, or
  3. semi-variable, which vary only beyond a given production level.

Flexible budgets gives recognition to the fact that the different variable costs do not vary in the same proportion to production levels.