Semi Variable cost in a Flexed budget

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Registered Posts: 26 Dedicated contributor 🦉
Hi everyone I hope someone can help me please, I have gone BLANK What do you do with a semi variable cost in a flexed budget?? I obviously know about SV costs (hi-low etc etc) but I just don't understand what to do with them in the flexed budget? Example: Energy is 215,000 @ budget 76,000 units - its then 201,215 @ actual 72,000 units It states that the variable element is £2.50 per unit and gives the Flexed budget (72,000) at 205,000 giving a favourable variance of 3750 It is not sinking in someone PLEASE explain Thank you! XO

• Registered Posts: 51 Epic contributor 🐘
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Hi SammyRPA
I'm not sure I understand your question!! All you calculations are correct...(72000 Units *£2.5 per unit) + £25,000 fixed element = £205,000. The actual is £201,215 so you have a fav variance of 3750. And thats is!! Hope this helps!!
• Registered, Moderator Posts: 2,034 mod
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Sammy and Kelly
I disagree with both of you.
I make the variance £3,785 favourable

See the attached excel worksheet
Kelly's method and mine are identical arithmetically even though our layouts are different

1. Total budgeted cost £215,000 less total budgeted variable cost of £2.50/unit x 76,000 units = £215,000 - £190,000 = £25,000
2. Find the cost in the flexed budget I have copied Kelly's answer (72000 Units *£2.5 per unit) + £25,000 fixed element = £205,000
3. Subtract the actual cost from the flexed budget total cost £205,000 - £201,215 = £3,785 (which is favourable because the actual cost was a lower value than the actual cost)
Sandy
sandy@sandyhood.com
www.sandyhood.com
• Registered Posts: 26 Dedicated contributor 🦉
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Thank you SO much both of you!! I knew it would be simple!!! Can't thank you enough for helping me with that mental block..Lifesavers xo
• Registered Posts: 51 Epic contributor 🐘
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Your dead right SandyHood. I didnt actually calculate the variance, I assumed the figure Sammy had given was correct. Should have got a calculator to that one!!