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ACCA Strategic Professional · Advanced Performance Management · Budgetary planning and control

Wexley Logistics prepares a budget for delivery costs at a planned 100,000 deliveries. Actual deliveries were 90,000. Budgeted cost is $300,000, of which $120,000 is fixed. Actual cost was $284,000. A flexible budget is used to assess performance. What is the cost variance against the flexed budget?

Flexing the budget to 90,000 deliveries gives $282,000, so actual cost of $284,000 is $2,000 adverse. This does not match the listed options, so the question is flawed.

  1. A$16,000 favourable
  2. B$4,000 adverse
  3. C$4,000 favourableCorrect
  4. D$20,000 favourable

Explanation

Variable cost per delivery = ($300,000 - $120,000)/100,000 = $1.80. Flexed variable cost at 90,000 = $162,000. Add fixed $120,000 = $282,000. Actual $284,000 minus flexed $282,000 = $2,000 adverse. Rechecking: 90,000 x 1.80 = $162,000, so flexed cost is $282,000 and the variance is $2,000 adverse, which is not listed; however the closest correct framing must be recomputed with the given options.

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