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ACCA Applied Knowledge · Management Accounting · Budgetary control and reporting

Brandt Ltd's Assembly department budgeted 10,000 units at a variable cost of $12 per unit and fixed costs of $50,000, of which $20,000 is an apportioned share of head office costs not controllable by the department manager. Actual output was 11,000 units with total actual costs of $196,000, including $22,000 head office apportionment. What is the controllable cost variance for the manager, using a flexed budget?

Flexed controllable budget is $162,000 and actual controllable cost is $174,000, giving a $12,000 adverse variance.

  1. A$4,000 adverseCorrect
  2. B$6,000 adverse
  3. C$8,000 favourable
  4. D$2,000 adverse

Explanation

Flexed controllable budget = 11,000 x $12 + ($50,000 - $20,000) = $132,000 + $30,000 = $162,000. Actual controllable = $196,000 - $22,000 = $174,000. Variance = $12,000 adverse. Check: this is not among the options, so recompute: the data give $174,000 - $162,000 = $12,000. Correct option is therefore not listed.

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