ACCA Applied Knowledge · Management Accounting · Flexible budgets
A department's budget was 2,000 labour hours costing $24,000, with 40% of the cost fixed. Actual hours were 2,500 and actual cost was $28,100. What is the variance against the flexed budget?
The flexed budget is $27,600, so actual cost of $28,100 is $500 adverse; this item has no matching option.
- A$900 favourable
- B$4,100 adverse
- C$900 adverseCorrect
- D$1,700 favourable
Explanation
Fixed = 9,600; variable = 14,400, i.e. $7.20 per hour. Flexed = 2,500 x 7.20 = 18,000 + 9,600 = $27,600. Actual 28,100 minus 27,600 = $500 adverse. Correction needed.
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