# Flexed Budgets

Registered Posts: 6,970
Going over what we did in college a couple of weeks ago and totally lost with the above what they are ect any help would be great

Thanks

Vic

• Registered Posts: 2,492
I'll try..

So say your actual output was 300 units, but your budget was set at 200 units you'd need to adjust all costs to match the 300 output as you can only compare costs at

(That's about as much as I can remember lol)
• Registered Posts: 1,800
it is a budget which changes to suit the income and expenditure.

if that helps
• Registered Posts: 6,970
ive only been at it for 2 hours and its not going in
• Registered Posts: 526
It's just a way to make a meaningful comparison on a 'like for like' basis - there's no point in comparing budgeted costs on an output of 100,000 units when actual output & sales were 150,000 units. The Osbourne book is pretty good. (Got mine from the library & fines this year are in excess of the price of buying the flippin' thing!)
Andrea.
• Registered Posts: 2,453
Hmm, not sure if my explanation will add anything to the above said, but here is my attempt:

If you got a budget set up for a number of units, you split the fixed costs from the variable costs and for the variable costs you work out the unit price (if not done already) and work them to the actual numbers produced or the new budget numbers you want. The fixed costs stay the same and if there are any stepped fixed costs, you pick the new amount, matching the new number of units.

For example this gives a more useful comparison between actual costs and budgeted costs, when you are calculating variances.
• Registered Posts: 85 💫 🐯 💫
Hi guys,

I was working with this flexed budget all day but I still don't get it. I must say this subject is very complicated. I realise some of the calculation I remember from unit 15 cash management some from ecr so I have to dust up my old notes, actually.
• Registered Posts: 2,453
Once you get your head around it, its not that hard anymore.

Look up your old notes about marginal costing, that's the best basis for the flexed budgets. And it's like a lot of the accounting concepts, once you get it, it's not that hard anymore.

Marginal costing was:

Selling price
minus variable cost
equals contribution
minus fixed costs
is profit.

For flexed budgets, it helps to split the variable cost and fixed costs in the same way. After that you calculate the unit price for all variable costs and the new budget is just a matter of multiplying the variable costs and transferring the fixed costs.

I know it's not as simple as that, but if you get that down, you got the basis and you can build up to the more complex budgets from there.

Hope this helps!
Cheers,
Rinske
• Registered Posts: 207 🎆 🐘 🎆
A-Vic wrote: »
Going over what we did in college a couple of weeks ago and totally lost with the above what they are ect any help would be great

Thanks

Vic

Ive got the December 2007 question with solutions on an excel spreadsheet if you would like it? you will be able to see where my figures have come from to get the answers. Also i have explained my calculations.

If you would like it just drop me a message with your email!
• Registered Posts: 585
Lyn32 wrote: »
Hi guys,

I was working with this flexed budget all day but I still don't get it. I must say this subject is very complicated. I realise some of the calculation I remember from unit 15 cash management some from ecr so I have to dust up my old notes, actually.

Flexing budget is simple.

Think logically and you will be fine.

you are basically tested on the cost behaviour.

some costs will be variable and therefore you need to recognise this. How? well you will be given 2 figures; budgeted (say material cost at 10,000 unit = £20,000) and actual (material cost at 20,000 unit = £40,000)

If you are required to flex at production of 30,000 units - and the answer is £60,000 for the cost of material. How did you get that? Well, you worked out cost per unit at 10,000 unit and at 20,000 units and in both instances it came out at £2 per unit. therefore the variable cost at £2 per unit for 30,000 units is £60,000

Some of the costs will be fixed and I am sure you will easily recognise that.

BUT some cost will be semi-variable. You will need to use the Hi-Low technique (learnt at Intermediate level) to determine fixed costs and variable cost per unit. Then calculate the flexed costs by adding the variable costs at 30,000 units to the fixed costs.

However, once you have understood the principle, in exams you will be given BUDGETED figures and ACTUAL figures. You will be required to flex to ACTUAL UNITS and then find the variences between FLEXED figures and ACTUAL figures.

Hope this helps
• Registered Posts: 85 💫 🐯 💫
Thank you so much guys,

I will take on board all your calculations and I will do my best to apply it. I keep trying hard to do a lot,but I guess doesn't help with my brain not fully functioning (with asthma attack and a heavy cold).

Thank you again for sharing a very clear explaination. Well appreciated!