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Flexing budget

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Flexing budget

  • This topic has 1 reply, 2 voices, and was last updated 9 months ago by John Moffat.
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  • Author
    Posts
  • April 13, 2022 at 7:29 pm #653260
    dik217
    Participant
    • Topics: 7
    • Replies: 4
    • ☆

    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

    April 14, 2022 at 7:25 am #653278
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51576
    • ☆☆☆☆☆

    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.

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