Example of flexible and fixed budget, Cost Accounting

Example of Flexible and Fixed Budget

A company has budgeted to produce and sell 100,000 units of cakes throughout the next period. The selling price per cake is Sh. 20 and variable cost per cake is Sh. 12.  Fixed overheads are budgeted to at Sh. 6000,000.

Additional information

1. Fixed costs will raises to Sh. 700,000 in that activity is in excess of 110,000 units; Fixed costs will decreases to Sh. 480,000 where activity level is less than 90,000 units.

2. Variable costs will fall with 5 percent per unit cake of all units where activity is in excess of 100,000 cakes due to the economies of scale.

The real results of the period in that 115,000 units cakes were produced and then sold were:

1. Sales revenue Sh. 2,242,500

2. Variable costs Sh. 1,320,000

3. Fixed costs Sh. 67,000

Required

1. Prepare a summary that Implies the budgeted results for activity levels from 80,000 to 120,000 cakes utilizing the above information.

2. Prepare a control statement comparing budgeted along with real results where a fixed budget system is utlized based on 100,000 units.

Solution

                                    Flexible Budget Summary

Units

 80,000

90,000

100,000

110,000

 120,000

Sales Revenue

1,600,000

1,800,000

2,000,000

2,200,000

2,400,000

Variable cost

690,000

108,000

120,000

1,254,000

1,368,000

Contribution

640,000

720,000

800,000

946,000

1,032,000

Fixed Costs

480,000

600,000

  600,00

600,000

700,000

Net Profit

160,000

  120,00

200,000

346,000

332,000

 

  Control Statement (Fixed Budget)

 

Budget

Actual

Variance

Units

100,000

115,00

15,00 (F)

Sales Revenue

2,000,000

2,242,500

242,500 (A)

Variable Cost

1,200,000

1,320,000

120,000    F  

Contribution

800,000

922,500

122,500 (A)

Fixed Costs

600,000

670,000

70,000 (A)

Net Profit

200,000

252,500

525,000 (F)

Posted Date: 2/7/2013 4:52:51 AM | Location : United States







Related Discussions:- Example of flexible and fixed budget, Assignment Help, Ask Question on Example of flexible and fixed budget, Get Answer, Expert's Help, Example of flexible and fixed budget Discussions

Write discussion on Example of flexible and fixed budget
Your posts are moderated
Related Questions
Using  the  information below, list profit statements  for June and July using  (a) margin costing and (b) absorption costing. A company produces and sells 1 product only which

Your organization (City Rehab) has been approached by an MCO looking for an exclusive arrangement for the rehabilitation of its hip replacement patients. The MCO is aggressively po

what are the classifications of labour costs? what is employee psyche?

What are the key reasons for product cost differences among traditional costing system and ABC systems? Explain four decisions for which ABC information is useful?

EARNINGS AFTER TAX-1500000 NUMBER OF EQUITY SHARE OUTSTANDING-300000 DIVIDEND PAID 600000 PRICE-EARNING RATIO-101 RATE OF RETURN ON INVESTMENT-20% WHAT IS OPTIMUM DIVIDEND PAY OUT


Purchase of office supplies.

Material Costs Material refers to each physical input into the production procedure. They involve the giving as: Raw material refers to bought in material that is used

All  transfer-pricing  methods  give  the  similar division  operating  income.  Do  you  agree? Describe.

Describe the meaning of the fixed production overhead variances calculated under the standard absorption costing system and talk about their usefulness to the management of X Ltd.