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Hello Sir,
I have a doubt regarding the fixed cost values we take while flexing the budget. As I have seen that in your lecture you have taken the original fixed cost value in the flexed budget (chapter 17 example 2) but in chapter 24 example 1 you calculate the fixed cost using the actual sales. Why is it so?I do explain in the lecture that the reason I do it is simply to explain the logic behind the fixed overhead volume variance when we are using absorption costing.
You will not be asked to do this in the exam – if ever you are required to flex a budget then the total fixed overheads stay fixed.
However when it comes to variances it is important to understand what the variances are and why they occur, and not to just simply learn rules. (Half of the exam is checking your understanding of things). That is the only reason I flex them in chapter 24.
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