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John Moffat.
John Moffat.-
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dik217
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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
John Moffat
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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.
dik217
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