ACCA Applied Knowledge · Management Accounting · Flexible budgets
A company budgeted to produce and sell 10,000 units, with budgeted variable costs of $40,000 and fixed costs of $25,000. Actual output and sales were 12,000 units. What is the flexed budget total cost for 12,000 units?
The flexed budget total cost is $73,000. Variable cost is $4 per unit, so 12,000 units cost $48,000, and fixed costs remain unchanged at $25,000 because they do not vary with activity within the relevant range.
- A$78,000
- B$73,000Correct
- C$65,000
- D$48,000
Explanation
Variable cost per unit = $40,000/10,000 = $4. Flexed variable cost = 12,000 x $4 = $48,000. Fixed costs stay at $25,000. Total = $73,000. The $78,000 option wrongly flexes the fixed costs as well (65,000 x 1.2).
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