Flexible Budgets Flashcards
What is a flexible budget?
One that recognises that costs and revenues will change if the level of activity changes from the budgeted amount.
How are budgets flexed to produce flexible budgets?
The flexible budget will consider what the budget should have been at a certain level of activity to compare what has happened and should have happened at a level of activity.
How are fixed, semi fixed and variable costs treated in flexible budgets?
Fixed stay fixed
Variable stay variable
Semi fixed can be broken down using high-low method.
What is the high low method?
High cost - low cost / High output - low output
= Variable cost per unit
Total cost = fixed cost + (variable cost x output)
Flexed budget sales
Budgeted selling price x actual sales
Flexed direct material costs
Budgeted cost per unit x actual units produced
Flexed direct labour costs
Budgeted cost per unit x actual units produced
Flexed production overheads
Budgeted cost per unit x actual units produced
Flexed selling & admin costs
High Low method
