Question

Knowledge Check 01 Acme Manufacturing Company prepared a fixed budget based on the expected sales of 160,000 units. That fixed budget included variable costs totaling $800,000 and fixed costs totaling $240,000. If the company instead uses flexible budgeting and actually sells 200,000 units during the year, what are the amounts that will be included in its flexible budget performance report for total variable costs and total fixed costs?

Answer 1

The amount for the Flexible budgeted report including the total variable costs and total fixed costs is $1,000,000 and $240,000 respectively.

Here, we are to determine the amounts to be included in the flexible budget performance report for total variable costs and total fixed costs

             Fixed budget

Particulars              

Sales Units             160,000 units

Variable cost          $800,000

Fixed Cost              $240,000

Under the flexible budgeting system, the 200,000 units are produced

            Flexible budget

Particulars              

Units                         200,000 units

Variable cost           $1,000,000  [$800,000 * (160,000/200,000)]

Fixed Cost               $240,000

Therefore, the amount for the Flexible budgeted report including the total variable costs and total fixed costs is $1,000,000 and $240,000 respectively.

The missing options includes "a.$800,000 and $300,000 b. $800,000 and $240,000 c. $1,000,000 and $300,000 d. $1,000,000 and $240,000"

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