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Sir,help me with this question.
Budgeted results and actual results for September are shown below.
Fixed budget Actual
12,000 units 11,200 units
$ $
Sales 600,000 571,200
Direct costs (144,000) (145,600)
Fixed costs (70,000) (69,500)
Profit/(loss) 386,000 356,100what is the profit of the flexed budget.
according to answer, fixed costs for flexed budget here stay fixed which is still 70,000
but I remember the fixed costs in the flexed budget changed(produce more units) ,though the fixed costs should have stayed fixed.so in the exam, I should calculate flexed budget considering that fixed costs should stay fixed?
If you are asked to flex a budget, then the fixed costs do stay fixed. Only the revenue and the variable costs will change.
(I think what may be confusing you is that in my lecture on variance analysis with absorption costing, I do flex the fixed costs. I do this simply to explain why the fixed overhead variances are what they are when using absorption costing.)
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