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1>sir in budgeting chapter where u prepare flex budget under marginal approach u told that fixed overhead remain same in both original and flexed budget.
but in variance chapter u prepare the flex budget under absorption costing and u absorb the fixed overhead over the actual activity level , so the fixed overhead doesn’t remain same in original and flexed budget.
do we do that only when we flex the budget under absorption costing and not in marginal costing, or its only when we have to do variance analysis under absorption costing we do that, other time while flexing the budget under absorption costing we don’t do that.
2>and another question can a standard cost card of a unit also include non production cost apart from production cost, and if so do we calculate standard profit per unit by deducting the total cost as per standard cost card from selling price of a unit to find the budgeted profit.
also in variance ch. u said we value closing inventories at standard cost ignoring the actual cost. so does that mean next month when that becomes opening inventory we value it at standard cost only. right
First question:
We only flex the fixed overheads if it is absorption costing.
If it is marginal costing then we do not flex them.Second question:
The standard cost card never includes non-production costs – only production costs.Third question:
Both opening and closing inventories are valued at standard cost.
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