Respuesta :
If the planned fixed overhead for 5,000 units is $120,000, then the flexible budget fixed overhead for 4,500 units is $108,000.
First find the selling price under the planned budget:
= 120,000 / 5,000
= $24
The flexible budget revenue will be:
= 24 x 4,500 units
= $108,000
- Fixed overhead expenses are expenses that remain constant regardless of changes in the volume of production activity. Fixed expenses must be maintained in order for a business to run smoothly because they are fairly predictable. Profit margins, however, ought to take fixed overhead costs into account.
Some instances of fixed overhead expenses are:
- leasing costs for the production facility or corporate headquarters
- wages for plant directors and supervisors
- Depreciation cost for permanent assets
- taxation and insurance
Fixed overhead costs are typically stable and shouldn't deviate from the budgeted amounts designated for them. However, as staff is added, new managers and administrative staff are hired, and fixed overhead costs rise if sales far exceed what a company budgeted for. Additionally, fixed overhead costs would need to go up in order to maintain the business' smooth operations if a building needs to be expanded or a new production facility must be rented in order to handle increased sales.
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