ACCA Applied Knowledge · Management Accounting · Budgetary control and reporting
A department's original budget was 2,000 labour hours at $15 per hour. Actual output required 2,300 hours in the flexed budget, and actual labour cost was $36,800 for 2,300 hours. What is the total labour cost variance against the flexed budget, if labour cost is wholly variable?
The variance is $2,300 adverse. The flexed budget allows 2,300 hours at $15, which is $34,500, and the actual cost was $36,800. Comparing with the original $30,000 budget would wrongly include the effect of higher activity.
- A$2,300 adverseCorrect
- B$6,800 adverse
- C$2,300 favourable
- D$6,800 favourable
Explanation
Flexed budget cost = 2,300 x $15 = $34,500. Actual cost = $36,800. Variance = $2,300 adverse. Comparing with the original budget of $30,000 would give $6,800 adverse, which ignores the change in activity.
Did you get it right without looking?
One question tells you little. A timed set on Budgetary control and reporting shows your real accuracy, how long you take and where you lose marks.
More Budgetary control and reporting questions
- A company's monthly budgetary control report compares actual results with the original fixed budget. Actual output was 12,000 units against …
- A company's budget for a period was 5,000 units of output at a total cost of $60,000, of which $20,000 is fixed. Actual output was 5,500 uni…
- A company's budget for a period was 8,000 units at a total cost of $96,000, of which $40,000 is fixed. Actual output was 9,000 units and act…
- A department's budget for the year was $240,000 and managers know that unspent budget is cut next year. In the last month, the manager buys …
- Hartley Co has a Production division with a manager who has no authority over insurance policies. Head office charges the division $18,000 f…
- Orla Co's Packing department budgeted controllable costs of $80,000 at 8,000 units. Of this, $24,000 is fixed and the rest is variable. Actu…