ACCA Applied Knowledge · Management Accounting · Flexible budgets
Budget for 2,000 units: sales revenue $50,000, direct materials $12,000, direct labour $8,000 (variable), fixed overheads $15,000. Actual output and sales were 2,400 units. What is the flexed budget profit?
Flexed budget profit is $21,000. Contribution is $15 per unit, so 2,400 units yield $36,000, from which the unchanged $15,000 of fixed overheads is deducted. The original budget profit of $15,000 is not relevant at the actual activity level.
- A$15,000
- B$21,000Correct
- C$18,000
- D$12,000
Explanation
Contribution per unit = (50,000-12,000-8,000)/2,000 = $15. At 2,400 units contribution = $36,000. Less fixed overheads $15,000 gives profit $21,000. Profit of $15,000 is the original budget profit before flexing; $12,000 results from flexing fixed costs too.
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