ACCA Applied Knowledge · Management Accounting · Flexible budgets
A company's fixed budget for 10,000 units shows variable costs of $60,000 and fixed costs of $40,000. Actual output was 12,000 units. What is the total cost in the flexed budget for 12,000 units?
The flexed budget total cost is $112,000. Variable cost of $6 per unit is applied to 12,000 units, giving $72,000, and fixed costs of $40,000 remain unchanged because they do not vary with output within the relevant range.
- A$112,000Correct
- B$120,000
- C$100,000
- D$132,000
Explanation
Variable cost per unit = 60,000/10,000 = $6. Flexed variable cost = 12,000 x 6 = $72,000. Fixed costs stay at $40,000. Total = $112,000. Flexing the total cost proportionally gives $120,000, which wrongly treats fixed costs as variable.
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