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- March 5, 2021 at 11:24 am #613506
Many thanks for the assistance.
A firm sets its fixed budget at 100 percent capacity. the budgeted sales is 300000 and a budgeted net profit is 50000 budgeted cost are 70 percent fixed and 30 percent variable what is the flexed budget for net profit at 80 percent capacity. .the Answer from the examiners comment says 5000.
solution
100 percent capacity 300000less profit
50000
gives
250000fc at 70 percent equals 175000
VC at 30 percent equals 75000at 80 percent capacity 300000*80/100 equals 240000
fc remains the same 175000
VC will change obviously but I Can not work out the figure. could you please help me to finish off the question to get the 5000. thank you very much.March 5, 2021 at 2:16 pm #613526At 100% capacity, the total costs are 300,000 – 50,000 = $250,000.
Therefore the fixed costs are 70% x 250,000 = $175,000, and the variable costs are 30% x 250,000 = $75,000.
So the contribution at 100% capacity is 300,000 – 75,000 = $225,000.
Therefore the contribution at 80% capacity is 80% x 225,000 = $180,000, and the profit is 180,000 – 175,000 = $5,000.
March 5, 2021 at 3:14 pm #613534thank you very much
March 6, 2021 at 7:46 am #613683You are welcome 🙂
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