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Q) Globe Ltd. has the following original budget and actual performance for product Bean for the year ending 31 December.
>>Budget:-
Volume sold (litres)- 4,000
Sales Revenue- 1,500,000
-Less costs:
DM- 36,000
DL- 176,000
FixedO/H- 89,000
Operating Profit- 1,199,000>>Actual:-
Volume sold (litres)- 5,000
Sales Revenue- 1,950,000
-Less costs:
DM- 45,000
DL- 182,000
FixedO/H- 90,000
Operating Profit- 1,633,000What is the total production cost of the flexed budget?
This question is from Kaplan and the answer at the back says:
(36,000 + 176,000) / 4,000 x 5,000 = 265,000
265,000 + 89,000 =$354,000This makes no sense to me and even if I did the above calculation I won’t get the same answer.
So, I made the flexed budget with the help of the info given and by adding the DM (45k), DL(220k) and Fixed O/H(89k) I was able to get $354,000 as the total production cost but I would like to know if I am right or wrong.I do not understand, because you have the same answer – $354,000!
How you arrived at the answer is irrelevant. What matters is the final answer 🙂
You have flexed material and labour separately. Kaplan have flexed the total of the two.
Obviously either way gives the same final answer!
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