According to changes in actual revenue or other activities, a flexible budget can be adjusted. The end result is a budget that closely matches actual outcomes. This method differs from the more typical static budget, which only lists fixed spending figures that do not change in accordance with real revenue.
Flexible spending plans adapt to activity levels. It is prepared at different output levels. Compared to the static budget, it is more sophisticated.
The flexible budget, at its most basic, adjusts the costs that directly correspond to changes in income. To determine what expenses should be at a given revenue level, the model often includes a percentage that is multiplied by actual revenues. Flexible Budget reflect a company's anticipated costs based on variation on activity levels.