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Fixed cost

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Fixed cost

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • October 27, 2021 at 2:00 pm #639231
    HamzaYusuf
    Member
    • Topics: 38
    • Replies: 19
    • ☆☆

    Fixed costs stay the same (or fixed) with the production units BUT why is the fixed costs in the flexed budget does not remain the same between actual and flexed in your notes example?

    Does it because we used absorption costing which includes the fixed cost in the production cost of a unit?

    How does the fixed cost in absorptional and marginal costings affect budgeting?

    Could you please say what does FLEX means in Flexed budgeting?

    October 27, 2021 at 4:10 pm #639245
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51555
    • ☆☆☆☆☆

    Yes – it is when we are doing variance analysis with absorption costing that we flex the fixed costs because they are absorbed into the production cost. I flex the budget in my variance analysis example just so as to explain why the fixed overhead variances are what they are when using absorption costing.

    If we are asked just to prepare a flexed budget (not for variance analysis purposes) then whether we are using marginal or absorption costing we assume that the fixed overheads stay fixed in total.

    Flex is simply another word for adjust.

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