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flexedbudget

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › flexedbudget

  • This topic has 2 replies, 2 voices, and was last updated 3 years ago by John Moffat.
Viewing 3 posts - 1 through 3 (of 3 total)
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  • December 5, 2021 at 11:00 am #642587
    Syed Ahsan Ali
    Participant
    • Topics: 136
    • Replies: 85
    • ☆☆☆

    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?

    December 5, 2021 at 2:18 pm #642603
    Syed Ahsan Ali
    Participant
    • Topics: 136
    • Replies: 85
    • ☆☆☆

    Sorry but I realize it is not correct. I got the answer 🙂

    Thanks anyway

    December 5, 2021 at 3:51 pm #642619
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    No problem 🙂

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