Question
A business produced the following two budgets at the start of the period. The actual results have also been provided. Prepare a flexible budget and
A business produced the following two budgets at the start of the period. The actual results have also been provided. Prepare a flexible budget and state whether the variances are adverse or favourable. Show all figures as positive numbers.
Electricity is a semi-variable cost.
Quality control is a stepped cost. The cost increases by 2,000 for each 500 units produced.
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| ORIGINAL BUDGET | REVISED BUDGET | ACTUAL | FLEXED BUDEGT | VARIANCE | ADVERSE/ FAVOURABLE |
| Units | 2,000 | 2,200 | 1,900 |
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| Sales revenue | 200,000 | 220,000 | 185,000 |
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| Materials | 24,000 | 26,400 | 21,000 |
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| Labour | 18,000 | 19,800 | 16,000 |
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| Variable | 15,000 | 16,500 | 14,000 |
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| Overheads |
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| Electricity | 22,000 | 22,800 | 20,000 |
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| Quality control | 10,000 | 10,000 | 10,000 |
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| Fixed overheads | 36,000 | 36,000 | 40,000 |
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| Net profit | 75,000 | 88,500 | 64,000 |
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