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

Regression analysis method of cost estimation, Regression Analysis Method o...

Regression Analysis Method of Cost Estimation It includes estimating the cost function by utilizing past data or the dependent and the independent variables. Hence the cost fu

Determine the rate of return, A forecasted increase in metal prices has enc...

A forecasted increase in metal prices has encouraged the ABC Resource Company to consider the expansion of the capacity in one of its mine operations in Northern Ontario. For this

Uniform Capitalization rules, Are public service corporations subject to un...

Are public service corporations subject to uniform capitalization rules?

Bird house, Develop costing for the production units to explain the manufac...

Develop costing for the production units to explain the manufacturing expenses that the proposed product will require for the first year of production. This portion requires the fo

Which of the floowing is not capital budgeting decision, 1. when using the ...

1. when using the internal rate of return method to evaluate capital spending on a new project, the project will be accepted if the internal rate of return is equal to or greater t

Standard costing, behavioral aspect of standard costing

behavioral aspect of standard costing

Determine the ethicality of the events within the case, Write a 1,200- to 1...

Write a 1,200- to 1,500-word paper explaining the legal aspects, financial standards involved, and ethicality of the Excello Telecommunications case. Your paper should include the

Supplies and prepaid expenses, Inventory, Supplies and Prepaid Expenses ...

Inventory, Supplies and Prepaid Expenses You can well understand the requirements for carrying inventory. So as to  carry  on operations unhindered we require to have sufficien

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