flexedbudget

In chapter 14 example 1, we are using absorption costing because the fixed cost is included in the production costs. However, if we are using marginal costing then fixed cost is not included in the production costs. Flexed budget using Absorption costing: -----------------------------------Fixed---------Flexed----------Actual Sales units---------------------8000----------8400------------8400 Production units--------------8700----------8900------------8900 Sales revenue---------------600000-------630000---------613200 Material cost---------------(156600)------(160200)-------(163455) Labour cost-----------------(217500)------(222500)-------(224515) Variable OH-----------------(87000)--------(89000)---------(87348) Fixed OH--------------------(130500)------(133500)-------(134074) Production costs------------591600--------605200--------609392 less:closing inventory------(47600)-------(34000)---------(34000) -----------------------------------544000-------571200--------575392 Profit-----------------------------56000--------58800----------37808 Flexed budget using Marginal costing: -----------------------------------Fixed---------Flexed----------Actual Sales units---------------------8000----------8400------------8400 Production units--------------8700----------8900------------8900 Sales revenue---------------600000-------630000---------613200 Material cost---------------(156600)------(160200)-------(163455) Labour cost-----------------(217500)------(222500)-------(224515) Variable OH-----------------(87000)--------(89000)---------(87348) Production costs------------461100--------471700---------475318 Contribution------------------138900--------158300---------137882 Fixed OH---------------------(130500)------(133500)-------(134074) ------------------------------------8400-----------24800-----------3808 less:closing inventory------(37100)-------(26500)---------(26500) Profit / Loss------------------(28700)--------(1700)-----------(22692) Change in inventory is 700 for budgeted units Change in inventory is 500 for actual units Closing inventory is calculated by taking all the variable costs (18 + 25 + 10) = $53 per unit: Fixed budget = 700 x $53 = 37100 Flexed budget = 500 x $53 = 26500 Actual budget = 500 x $53 = 26500 Is that correct?