How to create a flexible budget

• 1. Identify variable and fixed costs The first step in creating a flexible budget is determining fixed costs and variable costs. ...
• 2. Divide the budget Once you identify the variable costs you may incur, determine the variable cost as a percentage of the activity level or per-unit basis. ...
• 3. Create your budget ...
• 4. Update the budget ...
• 5. Input and compare ...

Here’s how the flexible budget might look:

• Food Expenses: $1.50 per customer x 3,000 customers = $4,500
• Labor Expenses: $3,000
• Rent and Utilities: $2,000
• Marketing and Advertising: $1,000
• Other Expenses: $1,000