# Budgeting Example 2

1. says

Sir, i have a question. a company uses flexed budgets. The fixed budget last month was based on 100% activity level and showed material costs of \$200k. Last months actual material cost were \$120k and showed a favourable variance of \$5000 when compared with the flexed budget. What was the actual level of activity last month as a %?

p.s i got wrong for this when doing the revision mock exam.

• says

If actual costs had a favourable variance then the standard cost for the actual production would be 125,000. Since the original budget was 200,000, the activity level must be 125/200 = 62.5%

2. says

HI sir there one problem in Flexed budget on Variable overhead side
Variable OH Per unit = \$12,500 / 10,000 Units = \$2 per unit
if we multiply it by actual level of activity we will get \$24,000 for variable overhead in flexed budget

3. says

Hi johnmoffat

A Co. uses Flexed Budgets:The fixed budget last month was baase on 100% Activity level and show material cost of
\$200,000. Last month’s actual material cost were compared with the flexed budget and show the follow:

material Actual 120,000 Variance 5000 favourable

What was the actual activity last month as a percentage

• says

Because the variance was 5000 favourable, it means that the flexed budget will show materials of 125,000.

The original budget at 200,000, and so the actual activity must have been 125,000/200,000 x 100%

4. says

lecturer.
i feel sorry for you and you might send your students to TIME OUT for not remembering the term CONTRIBUTION………..even i named the term when you asked…………

• says

I always have to remind people what contribution is

The term is used in later exams also, and always many people forget what it is!

5. says

I have a question.

QT co. Manufactures a single product and an extract from their flexed budget for production costs is as follows.
80%. 90%
Direct material. 2400. 2700
Labour. 2120. 2160
Production o/h. 4060. 4080

What would the total production cost allowance be in a budget flexed at the 83% level of activity?

I keep on getting 7121.4 which is wrong. Any help plz???????

• says

You need to us high/low because some of the costs are variable and some of the costs are fixed.

The total cost for 80% is 2400 + 2120 + 4060 = 8580
The total cost for 90% is 2700 + 2160 + 4080 = 8940

So, the variable cost for 10% is 8940 – 8580 = 360.
So the variable cost for 3% (83% – 80%) is 3/10 x 360 = 108

So the total cost for 83% is 8580 (the cost for 80%) + 108 (the extra variable cost for the extra 3%) = 8688.
(there is obviously no extra fixed cost for the extra 3%)

6. says

feels like a day at the spa…..sipping on some coconut water…………….REJUVENATING!!!!!thx OT!!