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A flexible budget is helpful when a business faces constant changes in costs or income, like seasonal demand or shifts in production. Unlike a fixed budget, which is set in advance, a flexible budget adjusts to real activity levels. This approach is useful in industries like healthcare, where patient numbers vary, helping organizations adjust spending to match actual needs and providing a clearer picture of financial performance.

A fixed budget, also called a forecast budget, is set at the beginning of a period and remains the same, regardless of changes. It$$s ideal for stable environments where expenses and revenues are predictable. Fixed budgets work well in settings where operations follow a consistent pattern, though they may lack the adaptability needed during unexpected changes.