The functional budget is one that relates to any of the functions of an organization. The number of functional budgets depends upon the size and nature of business. The following are the commonly used:
A flexible budget is a budget that takes into account changes in sales volume and other cost driver activities.
The budget incorporates the effects on each cost and revenue as a result of the change in activity. It determines the variability of the cost along with the level of activity, which will be then used as a control tool. The aim of this budget is to control the cost.