ACCA Applied Knowledge · Management Accounting · Flexible budgets
Budgeted sales were 5,000 units at $20 each with variable cost $12 per unit and fixed costs $18,000. Actual sales were 5,600 units at $19 each, variable costs $70,000 and fixed costs $19,500. What is the total variance between flexed budget profit and actual profit?
Flexed budget profit is $26,800 and actual profit is $16,900, giving a $9,900 adverse variance. It comprises $5,600 adverse from price, $2,800 from variable costs and $1,500 from fixed costs.
- A$9,900 adverseCorrect
- B$5,600 adverse
- C$8,400 adverse
- D$1,500 adverse
Explanation
Flexed profit = 5,600 x (20-12) - 18,000 = $26,800. Actual profit = 106,400 - 70,000 - 19,500 = $16,900. Variance = $9,900 adverse, made up of price 5,600, variable cost 2,800 and fixed cost 1,500 (all adverse). $5,600 is only the selling price element.
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