How to Estimate for a Flexible Budget

by C. Taylor, studioD

A fixed price budget is easier to calculate than a flexible budget, but it doesn't allow for variable costs. As an example, a landscaping business may have a fixed supply cost, but wages are dependent on the number of hours worked. Flexible budgets allow for such variables, which change according to necessity. In the aforementioned example, a flexible budget might be expressed as a combination of a fixed and flexible budget, such as $2,500 plus $10 per man-hour.

Add the fixed monthly costs. Include any regular costs that do not change. In the example, you might include secretary that only works a set number of hours, payments on machinery and miscellaneous supplies. If you paid your secretary $10 per hour for 40 hours per week, four weeks per month, then her fixed cost is $1,600. If machinery payments and supplies totaled $900 per month, your total fixed costs would be $2,500 per month.

Add all the flexible costs that change with use. In the example, if you only paid wages when you had a customer, then the cost of wages may change dramatically between months. Slow winter months might have no wages, but you might pay six full-time landscapers during the summer. In that case, your flexible costs would be the landscaper wages, such as $10 per hour.

Express your flexible budget as fixed and variable costs. In the example, $2,500 plus $10 per man-hour allows you to calculate a variable monthly budget. On dead winter months, your cost might just be $2,500, because you're paying no landscapers. On prime summer months with six full-time workers, your cost is $2,500 plus $9,600, or a total of $12,100.

About the Author

C. Taylor embarked on a professional writing career in 2009 and frequently writes about technology, science, business, finance, martial arts and the great outdoors. He writes for both online and offline publications, including the Journal of Asian Martial Arts, Samsung, Radio Shack, Motley Fool, Chron, Synonym and more. He received a Master of Science degree in wildlife biology from Clemson University and a Bachelor of Arts in biological sciences at College of Charleston. He also holds minors in statistics, physics and visual arts.

Photo Credits

  • Stockbyte/Stockbyte/Getty Images