ACCA Applied Knowledge · Management Accounting · Flexible budgets
A fixed budget for a department shows 10,000 units, with total costs of $85,000. Variable costs are $5 per unit. Actual output was 12,000 units. What is the flexed budget total cost for 12,000 units?
The flexed budget cost is $95,000. Fixed costs of $35,000 stay unchanged, found by deducting $50,000 variable cost from $85,000, and variable cost for 12,000 units at $5 adds $60,000. Scaling total cost proportionally would wrongly flex fixed costs.
- A$102,000
- B$95,000Correct
- C$85,000
- D$60,000
Explanation
Fixed cost = 85,000 - (10,000 x 5) = 35,000. Flexed cost = 35,000 + (12,000 x 5) = 95,000. Using $102,000 wrongly scales the whole cost, treating fixed costs as variable.
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