ACCA Applied Knowledge · Management Accounting · Budgetary control and reporting
Budgeted production at Orion Ltd was 10,000 units, with fixed overheads of $80,000 and variable overheads of $3 per unit. Actual production was 11,000 units and actual total overheads were $118,000. The overheads are controllable by the production manager. What is the controllable cost variance on a flexed basis?
The variance is $5,000 adverse. The budget flexed to 11,000 units is $80,000 fixed plus $33,000 variable, totalling $113,000. Actual overheads of $118,000 exceed that by $5,000, so the manager overspent against a like-for-like budget.
- A$5,000 adverseCorrect
- B$3,000 favourable
- C$2,000 adverse
- D$5,000 favourable
Explanation
Flexed budget = 80,000 + 11,000 x 3 = 113,000. Actual 118,000 exceeds this by 5,000, so adverse. Comparing with the original budget of 110,000 would give $8,000 adverse, which is wrong because activity differs.
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
- Which of the following is the best description of a controllable cost in the context of responsibility accounting?
- Marlow Co has a semi-variable cost. At 2,000 units the budgeted cost is $14,000 and at 3,500 units it is $19,250. Actual output was 3,000 un…
- Epsilon Ltd budgeted to produce 5,000 units with variable costs of $12 per unit and fixed costs of $30,000. Actual output was 5,600 units, a…
- A manager is told that a cost is uncontrollable at their level of management. Which statement is most accurate?
- Budgeted sales were 5,000 units at $20 each. Actual sales were 5,400 units at $19 each. Budgeted variable cost is $12 per unit. What is the …
- Vega Ltd's Department X had a budget of $200,000 and actual costs of $236,000, including $15,000 of central service charges that were $6,000…