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?