• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

ACCA December 2022 Exam results:
* Pass rates * Comments * Instant Poll * Competition *

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

Flexible budget (BPP)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Flexible budget (BPP)

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • January 13, 2021 at 3:28 pm #605725
    milay92
    Participant
    • Topics: 3
    • Replies: 2
    • ☆

    Hi!

    Could you please help me with the following question.

    Chateau Larnaque has a bottling plant for its drinks and has prepared flexible budgets

    Bottles: 10,000 / 12,000 / 14,000

    Production costs:
    Materials: 30,000 / 36,000 / 42,000
    Labour: 27,000 / 31,000 / 35,000
    Overhead: 20,000 / 20,000 / 20,000

    Actual production was 12,350 bottles and the production costs incurred totalled $90,000.

    What is the meaningful total variance for performance evaluation purposes? (answer: $1250 adverse)

    The answer

    Materials: Variable costs = $3/unit
    Overhead: Fixed cost = $20,000
    Labour: (high low method)

    Output / Cost
    14,000 / 35,000
    10,000 / 27,000

    4,000 / 8,000

    VC/unit. $2
    By substitution into high output:
    Total VC: $28,000
    Total FC: $35,000 – $28,000 = $7000

    Flexed budgeted costs:
    Materials (12,350 x 3) = $37,050
    Labour (7000 + 2 * 12,350) = $31,700
    OH 20,000
    Total $88,750

    Actual costs – Flexed budgeted costs = 1250 (A)

    I don’t understand every part how I get to this answer. To get $28,000 (total VC) do I multiply this $2 VC/unit with output 14,000? I don’t understand the logic behind this. Why do I multiply it with the high output figure and not the lower for example?

    Thank you for your help

    January 14, 2021 at 8:21 am #605767
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51529
    • ☆☆☆☆☆

    I assume that you are happy with the calculation of the variable cost per unit of $2.

    To get the fixed cost you can do the calculation at any of the three levels.

    At 10,000 units, the total cost is $27,000. The variable cost is 10,000 units x $2 = $20,000. Therefore the fixed cost is 27,000 – 20,000 = $7,000.

    Or do it for 12,000 units. The total cost is $31,000. The variable cost is 12,000 x $2 = $24,000. Therefore the fixed cost is 31,000 – 24,000 = $7,000

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • AkilaShaikh on Capital asset pricing model (part b) – ACCA Financial Management (FM)
  • AkilaShaikh on Capital asset pricing model (part b) – ACCA Financial Management (FM)
  • hamza5168180 on Revenue – allocation – ACCA Financial Reporting (FR)
  • John Moffat on MA Chapter 4 Questions Cost Classification and Behaviour
  • John Moffat on Capital asset pricing model (part b) – ACCA Financial Management (FM)

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy