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ACCA F5 Types of budget Example 2

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  2. Dear Mr. Moffat,

    I have watched most of your lectures and find them very understandable and informative. However, I have one concern which is related to fixed overheads. In this example 2, it is required to prepare the flexed budget and what you did was that you kept the fixed overheads unchanged, as the nature of fixed cost.

    However, in another lecture of yours, which is chapter 13, basic variances analysis topic, requiring preparation of flexed budget and calculations of variances, you treated fixed overheads changed as other variable costs.

    Can you please clarify this?

    Thank you and wish all the best!

    • If we are simply flexing a budget then we keep total fixed overheads the same because the total will not change, by definition.

      In the lectures on variances, I do flex the fixed overheads when we are doing absorption costing, but I make it clear in the lecture that I am only doing it to explain why the fixed overhead volume variance appears. You will not be expected in the exam to flex fixed overheads, but you are expected to understand the variances (and are tested on your understanding) – not simply learn rules – which I why I did this.

  4. I have had difficulties understanding fixed, flexed and actual budget calculations. but, with this lecture, I now fully understand them and well prepared to face them in the exam no matter how twisted they appear.. Thank you Sir.?

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