How to or Steps To Establish A Flexible Budget

Earlier article describe the steps to prepare a budget and this article looks at how to establish a FLEXIBLE BUDGET.

Select the measure of activity like the units of production;

Define the relevant rage of activity for the budgeted performance based on the step 1;

Identify the cost items to be included in the budget;

Determine the cost behavior of each item over the relevant range;

Separate the cost items into variable, fixed and mixed;

Select the specific levels of activity to be budgeted;

Use the cost behavior under item 4 to estimate the budgeted amounts for each cost item at the different levels selected in step 6.