Example of flexible and fixed budget, Cost Accounting

Assignment Help:

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)


Related Discussions:- Example of flexible and fixed budget

Job order costing, Amazing acrobatics performs acrobatics in stadiums aroun...

Amazing acrobatics performs acrobatics in stadiums around the world. The average show sells about 1,000 tickets at $60 per ticket. Each show requires a team of 45 highly trained sp

Material cost, distinguish between bin card and store ledgre

distinguish between bin card and store ledgre

Feedback forward control system and feedback controls, A transport company ...

A transport company is preparing its cost budgets for the coming year. It has been set both social objectives & cost targets by the government which it must achieve in order to rec

Determine controllable margin and total contribution, Phelps Glass Inc. has...

Phelps Glass Inc. has reported the following financial data: net revenues of $10 million, variable costs of $5 million, controllable, fixed costs of $2 million, non-controllable fi

Trypanosoma, Place a prepared slide of Trypunosoma under tlic microscope an...

Place a prepared slide of Trypunosoma under tlic microscope and focus it under low power, You will observe large number of tiny spindle-shaped trypanosomes lying in the plasma alll

Limitations of standard costing, L I M I T A T I O NS OF STANDARD ...

L I M I T A T I O NS OF STANDARD COSTING 1.     It may be very difficult to fix standards for all operations. 2.     Incorrect standards may result in wastage of mo

Changes in recreational use value - water quality, You perform a travel cos...

You perform a travel cost study that looks at the relationship between the cost of visiting a lake (including costs of travel, value of time spent not working & any entry fees), it

the meaning of the fixed production, Describe the meaning of the fixed pro...

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.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd