Skip to content

ACCA Applied Knowledge · Management Accounting · Budgetary control and reporting

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 units and the actual cost was $18,000. What is the variance against the flexed budget?

The semi-variable cost has a variable rate of $3.50 per unit and fixed element of $7,000, so the flexed budget at 3,000 units is $17,500. Actual cost of $18,000 is $500 adverse against it. None of the listed figures matches exactly, so the question is flawed.

  1. A$250 adverseCorrect
  2. B$250 favourable
  3. C$1,000 adverse
  4. D$1,750 favourable

Explanation

Variable rate = ($19,250 - $14,000) / 1,500 = $3.50 per unit. Fixed element = $14,000 - 2,000 x $3.50 = $7,000. Flexed cost at 3,000 units = $7,000 + $10,500 = $17,500. Actual $18,000 gives $500 adverse. Recheck: 3,500 x $3.50 = $12,250 + $7,000 = $19,250, so the rate is right. The variance is therefore $500 adverse, not $250.

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