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sales (units) budget 120000 actual 100000
fixed production cost 300000 290000
fixed administration cost 360000 364000
what does flexed budget show
– its not the full question, i did everything right for other parts of the question but i was unable to get right answer for these two
answer is 300000 and 360000 for flexed budget
why answer is 300000 and 360000 is it because it is based on marginal costing , but question doesn’t
say that how can we know that its marginal costing, the nature of fixed o/h is to stay fixed in marginal but the actual budget is different maybe it would have been because of the change in unit , could you explain that sirWhen we are budgeting fixed costs always stay fixed in total, by definition, regardless of the method of costing being used.
The difference between absorption and marginal costing is only relevant when there are inventories (because the inventories are valued differently under the two methods) or when doing variance analysis. (I explain both of these in my free lectures.)
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