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Hello sir,
While attempting this question I valued fixed cost on the basis of 13,600 Units. but my answer was incorrect, they have valued fixed overhead on the basis of 15000 unit.
It is different from what i have seen in your lectures.
Can you please explain.F Ltd makes a single product for which the budgeted costs and activity for a typical month
are as follows:
Budgeted production and sales 15,000 units
Budgeted unit costs $
Direct materials 30
Direct labour 46
Variable overheads 24
Fixed overheads 80
––––
180
––––
The standard selling price of the product is $220 per unit. During October only 13,600 units
were produced.
What is the total budget cost allowance contained in the flexed budget for October?Thank you in advance
By definition, the total fixed costs not change with the level of production. They budgeted on a total of 15,000 x $80, and so this total will remain the same even though they actually produce fewer units.
This is what I do in my lectures on budgeting.
Sorry
Could you please explain why we consider
Flexed for 13,600 units= $1,360,000All the tasks before they used to calculate every line (direct mat, direct labor etc) separately, literally recalculating all the lines for actual units (13,600 here)
Why here we just multiply 13,600 by 100$ (36+46+24)?
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