Costing: Flexed Budgets

BenjaminGuy

Hello AAT forum!

I am having problems calculating the overheads within a flexed budget and I hope someone could help put my mind to rest. The usual Costing question shows a table with rows showing units sold, sales revenue, direct costs, fixed overheads and profit from operations and these amounts filled in for two columns titled original budget and actual. My job is to fill in the flexed budget column in the middle - so using the percentage difference between original budget: units sold and the actual: units sold I can calculate the variance for all the rows (and the resulting adverse or favourable variance), apart from the overheads.

Some questions state fixed overheads and the answers show an unchanged figure in the flexed budget and some say fixed overheads that have a change in the flexed budget.

This problem is clear to see in Management Accounting: Costing page 208, Question 7.8, which shows no change for fixed overheads in the flexed budget and the following question 7.9 shows that there is a change. Both questions say fixed overheads. Answers on pg 309.

Any advice would be greatly appreciated!

Ben.

P.S. Can tables be copied into the comments without losing format?

BenjaminGuy

The book I referenced is the purple Osborne AQ2016 syllabus.

BenjaminGuy

.....Tutorial.

RosieNC

Hi.
Usually fixed overheads should stay the same, because the different number of output units doesn't change them (they aren't related to output).
Not sure about the example you give where it changes - I don't have access to that example. Is there something different in the wording of the question? Are the fixed costs stepped? (I.e. At a certain level of output they increase)

N4T

Hi,

I have Osborne book but for AQ2013. I believe the contents/examples may be the same but page numbers reorganised. Do you have the name of your example where there is a change? On my version it's in chapter 8. 8.9 is a question on Perran Ltd.

No you can't copy and paste tables into comment. You'll have to take an image and upload it as an url......using tinypics for eg.

BenjaminGuy

Thanks RosieNC and N4T for responding.
The only difference I can see is that 7.9 states a raw material shortage. I've completed maybe 5 of these 'flexed budget' questions and, so far, 4/5 has shown no change for fixed overheads in the answers.

7.8
http://tinypic.com/m/jhwi21/3

7.8 - answer
http://tinypic.com/m/jhwi2d/3

7.9
http://tinypic.com/m/jhwi2a/3

7.9 answer
http://tinypic.com/m/jhwi2s/3

N4T

Hi,

The answer in the book is wrong. It should be 650.

http://www.osbornebooks.co.uk/files/management_accounting_costing.pdf

If the above link doesn't work, go to updates and corrections on their website.

BenjaminGuy

Thanks N4T.