Budgeting Question, PA1

Clareymary

hi

I wonder if someone could kindly help me working out the below answer...its taken from practice assessment 1, question 1.7,monthly operating report for calculating energy costs for the flexed budget..

data is:-
original budget energy cost is £60860, actual energy cost is £65080, what is the energy cost for the flexed budget of 192000 units?
original budget unit qty is 178000 units, flexed budget is 192000 units
energy costs are semi-variable, with a fixed element budgeted of £12800 per month

answer is £64640 but how do I get there?!

any help is greatly appreciated:-)

kkelly

Hi Clareymary,
Original Budgeted cost is £60,860. Take away the fixed element of £12,800 which leaves £48,060
now divide by original budget qty £48,060 / 178000 = £0.27p
multiply by flexed budget of 192,000 units = £51,840
and lastly add in the fixed amount of 12800 = £64,640
actual cost is 65080 giving an unfavourable variance of £440,

Regards
Kevin

Clareymary

hi thank you so much for your help. it now makes so much sense!:-)