Skip to content

ACCA Applied Knowledge · Management Accounting · Budgetary control and reporting

Budgeted output was 8,000 units with variable costs of $6 per unit and fixed costs of $20,000. Actual output was 9,000 units and total actual cost was $76,500. What is the total cost variance against the flexed budget?

The variance is $2,500 adverse. The flexed budget for 9,000 units is variable cost of $54,000 plus fixed cost of $20,000, totalling $74,000. Actual cost of $76,500 exceeds this by $2,500, so the variance is adverse.

  1. A$3,500 adverseCorrect
  2. B$2,500 adverse
  3. C$5,500 favourable
  4. D$3,500 favourable

Explanation

Flexed budget = 9,000 x $6 = $54,000 variable plus $20,000 fixed = $74,000. Actual $76,500 minus $74,000 = $2,500 adverse. Option 2 is therefore the correct figure, not option 1.

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.

Practise Budgetary control and reportingFree diagnostic mock

More Budgetary control and reporting questions