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You prepared a budget for the year ended 31 December 2016 in July 2015, assuming that the business would be operating at 80% capacity, with output expected of 20,000 units. This budget was not accepted by the Board of Directors and they asked you to prepare a second budget, assuming the same cost behaviours, but with a 90% capacity.
the actual results have been prepared using absorption costing;
Original Budget Revised Budget Actual Results
Units £000 Units £000 Units £000Turnover 20,000 £800 22,500 £900 23,000 £828
Material £160 £180 £207
Labour £240 £270 £299How to find the actual results??? The answers are: Material: 190
Labour: 275
i dont know how?I don’t know where you found this question, but if you really have copied it correctly then the question is complete nonsense (and the answer)!
According to what you have typed, the actual results are given in the question (materials 207 and labour 299).
Also, the mention of absorption costing is irrelevant – by looking at the original and revised budgets it is clear that both materials and labour are completely variable costs. (Absorption costing only makes a difference with regard to fixed costs).I do suggest that you use our free lectures for studying (they are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well), and that for practice you buy a Revision Kit from one of the ACCA approved publishers.
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