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Highlow

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Highlow

  • This topic has 5 replies, 2 voices, and was last updated 2 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • October 24, 2022 at 5:36 pm #669878
    reckless
    Member
    • Topics: 45
    • Replies: 112
    • ☆☆

    Kubrick uses a standard absorption costing system to control the cost of its only product. The flexed budget for production overhead for the company shows a budgeted total overhead cost of $200,000 per period when 5,000 tonnes are produced and $264,000 per period when 9,000 tonnes are produced.

    In period 9, when the actual output was 6,500 tonnes, total actual overhead cost was $245,000 (125,000 fixed and $120,000 variable). The standard fixed overhead absorption rate is $24 per tonne

    Sir we have to calculate fixed overhead volume variance

    In bpp kit it’s done like this

    120,000 budgeted production

    6500×24 156000 actual production
    —————-
    36000 favourable

    I don’t get it sir why are we using 5000 tonnes? And not 9000

    It doesn’t asks for high low here

    In requirement 1 it asked for high low to calculate variable overhead per tonne and fixed overhead

    And using that budgeted fixed overhead it asked for fixed overhead expenditure in requirement 2 where we are asked to calculate fixed overhead volume as well, so expenditure was simple as we had budgeted fixed expenditure and actual, but how are we solving fixed overhead volume here

    October 25, 2022 at 9:02 am #669911
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    From task 1, the budgeted fixed overheads are $120,000 (this is not the budgeted production – it is the budgeted fixed costs), and you can see the workings for this in the answer.

    From the question, the actual production is 6,500 and the absorption rate is $24, therefore the actual production as standard cost is $156,000.

    It seems you are not clear about task 1 – have you watched my lectures on high low?

    October 25, 2022 at 10:55 am #669919
    reckless
    Member
    • Topics: 45
    • Replies: 112
    • ☆☆

    No no sir i know those are budgeted fixed overheads of task 1, $120,000, that’s why i typed they’re using 5000 budgeted tones which is multiplied by 24 to get 120,000 for budgeted production as they’ve written that 120,000 is budgeted production and 6000×24 is 156000 actual production

    Because it asks us for volume, for fixed overheads budgeted ones which we calculated in task 1, we used that to find fixed overhead expenditure variance, but for volume we need budgeted production and actual, but we got 2 budgeted production lvls 5000 and 9000, and they’re using 5000, I can’t understand

    October 25, 2022 at 5:04 pm #669947
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    Have you actually watched all of my lectures??

    The fixed overheads are the same whether you use 5,000 or 9,000 units. Check it yourself and see!!

    (The fixed overheads, by definition, do not change with the level of production.)

    October 25, 2022 at 5:44 pm #669958
    reckless
    Member
    • Topics: 45
    • Replies: 112
    • ☆☆

    Mybad sir, really sorry i got confused because there were 2 different budgeted production, it’s probably because my exam is close which is why i couldn’t tell fixed doesn’t changes with level of production. Thankyou so much sir!

    October 26, 2022 at 8:28 am #670003
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    You are welcome.

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Viewing 6 posts - 1 through 6 (of 6 total)
  • The topic ‘Highlow’ is closed to new replies.

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