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I have two questions related to flexed budget please help me.
1) Flexed budgets using marginal costing:
Fixed Overheads are the same in the fixed budget and flexed budget in the marginal costing because fixed overheads are not absorbed in the product costs.2) Flexed budgets using absorption costing:
Fixed Overheads are different in the fixed budget and flexed budget in the absorptional costing because fixed overheads are absorbed in the product costs using actual labor hours.Am I correct AND This is what you have done in your lecture (true?)
No.
If you are asked to flex a budget, then the total fixed overheads stay fixed. The method of costing is irrelevant.
The only time in my lectures that I flex the fixed overheads is in the variance analysis lecture. I do this in order to explain why (when absorption costing is being used) we have the fixed overhead volume variance (because otherwise it is simply learning rules without understanding, which is no good for the exam). You will not ever asked to flex the fixed overheads in the exam.
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