Flexed budgets

amyjayne27

Morning all,

I am doing an assignment for my tutor ( I am with premier training) and I need some help! As usual the assignment is much harder than any of the tasks in my book and I'm stuck. I thought I was fairly confident at this subject too!

Anyway there is Budgeted and actual data - and you have to create a flexed budget, compare it to actual and state the variance which I am fine with. However, the sale volume in units for budgeted is 19000 and with actual 19500. Then in the information below it says that budgeted sales volume was for 19000 (fine) and actual sales volume was 21000 units. So I am confused, usually the actual data in the table is the same as the information below if that makes sense? So the flexed budget I have flexed to 21000 units, and have now got really confused.

In all my books there is a budgeted column in the table and an actual column and you simply flex the budget to the actual produced.

Please help and sorry if this doesn't make sense!

Amy

Diddy Mau

I would say flex to 19,500 as this is actual made. 21000 is total amount that can be made and held.
If I'm wrong, I'm sure someone else will correct me

amyjayne27

Dixon Digital produces the TB100, a computer component, and has asked you to analyse the performance of their manufacturing division as this is facing increasing competition from overseas suppliers.

You have been given the following budgeted and actual data fot the year ended 30th September 2010:

Budget Actual

Sales Volume (units) 19000 19500
Sales Revenue £ 370500 370500
*
Costs £ £

Materials 57000 60900
Labour 125200 133600
Power 34300 37500
Depreciation 69000 68900
Factory Rent 24000 25000
Other Overheads 10000 8000

Cost of Production 319500 333900
*
Less Closing Stock (23850)
Cost of Goods Sold 319500 310050

Operating Profit 51000 60450
The following is also relevant:

Budgeted production was 19000 units whilst 21000 units were actually produced.
Material is a variable cost.
Budgeted labour cost includes a fixed element of £15000 and the actual fixed cost was £16000.
Budgeted electricity cost fixed element was £5800 and the actual fixed cost was £6000.
Depreciation included a budgeted variable element of £1.00 per unit but the actual variable cost was £0.90 per unit.
All other overheads are a fixed cost.
Closing stock has been valued on an absorption cost basis.
Required

a) Calculate the following:

£
i) Budgeted selling price per unit.
ii) Budgeted material cost per unit.
iii) Budgeted variable labour per unit.
iv) Budgeted total variable electricity cost.
v) Budgeted depreciation fixed cost.
vi) Actual selling price per unit.
vii) Actual material cost per unit.
viii) Actual variable labour per unit.
ix) Actual total variable electricity cost.
x) Actual depreciation fixed cost.
b) Using the template, prepare a revised operating statement on a marginal costing basis.

This is the question, I do not want the answer I just want to understand it, it's so frustrating as I really thought I understood it. I have filled out to (v) fine, it's when it comes t the actual output questions I don't know if to use the 19500 or the 21000. And with the fixed costs, I have never had 2 figures before I.e. budgeted ad actual.

Thanks in advance

NicF

Hi Amy

The two figures are different because the top figure is sales where as the figure in the text is the amount actually produced so you have closing stock. You need to select the appropriate actual figure to find the values you need. So for vi you would use the actual number sold to calcualte the actual sales price per unit. The other variable costs you would use the actual number of units produced to calculate the actual costs per unit. Depreciation is a fixed cost so you just use the actual cost.

Hope this helps.

Nicola

amyjayne27

Thanks Nic, so when you mean for vi I need to calculate actual numbers sold this is 19500? So in the questions with 'actual' it is referring to the 19500? Do I flex my budget to 21000 units then?

Thanks

Edited to add - I have calculated those questions v - X okay, now with the Operating statement does the flexed budget need to show 21000 units? And the actual to show 21000 units or both to show 19500 units? Many thanks so far

amyjayne27

Thanks for everyone's help, I think I have cracked it finally!

Just a question am I likely to see a question like this in the exam or is it in the more simple form of just budgeted and actual and flexing the budget to the actual units?

Thanks again