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Flexed Budget

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Flexed Budget

  • This topic has 1 reply, 2 voices, and was last updated 5 months ago by John Moffat.
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  • January 4, 2022 at 9:16 pm #645302
    sarbrina
    • Topics: 21
    • Replies: 48
    • ☆☆

    Hi Mr. John,

    I just have a small doubt in this question.
    I just want to know how they got $2000 for Direct material and $1500 for Direct labour.

    25.11) CA Co manufactures a single product and has drawn up the following flexed budget for the year.

    60% 70% 80%
    $ $ $
    Direct materials 120,000 140,000 160,000
    Direct labour 90,000 105,000 120,000
    Production overhead 54,000 58,000 62,000
    Other overhead 40,000 40,000 40,000
    Total cost 304,000 343,000 382,000

    What would be the total cost in a budget that is flexed at the 77% level of activity?

    A $330,300
    B $370,300
    C $373,300
    D $377,300

    January 5, 2022 at 8:30 am #645318
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49595
    • ☆☆☆☆☆

    The direct materials are the direct labour are both variable costs.

    Therefore the material cost per % is 120,000/60 = $2,000 (and is the same whichever of the three levels you try.

    Similarly, the labour cost per % is 90,000/60 = $1,500 (and is again the same whichever of the three levels that you try).

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