A department's budget for 5,000 units is: variable costs £15,000 and fixed costs £40,000. Actual output was 6,200 units. What is the flexed budget cost allowance for 6,200 units?
Answer and explanation
Correct answer: B. £58,600
- Step 1: Variable cost per unit = £15,000 ÷ 5,000 = £3.
- Step 2: Flexed variable cost = 6,200 × £3 = £18,600; fixed costs remain £40,000.
- Step 3: Flexed budget = £58,600.
Answer
£58,600.
Why not the others: £55,000: This is the original budget for 5,000 units and has not been flexed. £68,200: This flexes the fixed costs as well, but fixed costs do not change with output. £18,600: This flexes variable costs and leaves out the fixed costs.
Practise more Budgeting.
Free questions with an explanation for every one, and full timed ACCA Applied Knowledge (BT, MA, FA) mock tests.
More Budgeting questions
- Which of the following best describes the principal budget factor?
- A company expects to sell 12,000 units next period. Opening finished goods inventory is 1,000 units and the closing inventory is planned at…
- The production budget is 12,500 units. Each unit needs 2 kg of material. Opening material inventory is 3,000 kg and the closing inventory is…
- A company's monthly sales are collected as follows: 60% in the month of sale (with a 2% discount for prompt payment), 38% in the following m…
- What is the main reason for using a flexible budget to assess performance at the end of a period?
- A company prepares its budget every month by adding a new month and dropping the month just completed, so that a twelve-month budget is alwa…