Static and flexible Budget
static budget : volume of production/s
Fixed costs 40,000 fleixble budget : actual budget of prod
variable per student 7 flexible variance : difference between
budgeted enrollment 800 VC Static budget & Flexible budget : v
actual enrolment 730 Static budget variance : Actual - Static
actual fixed costs 42,000 Favourable : Actual less than static bu
Actual Variable costs 3650 Non Favourable : Actual greater than s
800 students 730 students
static budget actual
Variable costs 5600 3650
fixed costs 40,000 42,000
total 45,600 45,650
730 students
flexible budget Actual
Variable costs 5110 3,650
fixed costs 40,000 42,000
total 45,110 45,650
VC Flexible budget : variable cost per student x actual enrolment
Actual : same amount as above
Static and flexible Budget
Price Quantity
Plush fabrics $2 15 meters per lot
direct labour $10 2 hours per lot
Variable overhead $5
Fixed overhead 24,000 per month
budgeted output 1,000 lots per month
actual output 15,000 lots in one year
12,000 15,000
Standard cost per lot static budget Flexible budget
Direct materials 30 360000 450000
Direct Labour 20 240000 300000
Variable overhead 5 60,000 75000
fixed overhead n/a 288,000 288,000
Total productions costs 948000 1113000
Static budget
Direct materials : price x quantity
Direct labour : price x quantity (direct labour )
Static budget (12,000) DM : direct materials x budgeted output x 12 months
Static budget (12,000) DL : direct Labour x budgeted output x 12 months
Static budget (12,000) VO: Variable overhead x budgeted output x 12 months
Fixed overhead x 12months = fixed overhead
Budget Variance : Actual - Static budget
Actual sales: selling price / Actual sales
Budgeted sales : static budget sales/ selling price
Flexible budget : Actual (sales)
DM: DM x Acutal sales
DL: DL x actual sales
Variable Overhead : VO x actual sales
Contribution margin : Total sales - Total variable costs
Variance efficiency/price : Actual - Flexible budget
Variance : Flexible budget - static budget
Variance /flexible budget = %
For the year
Profit and loss Static Budget
Profit and loss Sales : Budgeted sales price x budgeted sales volume
DM : price x budgeted sales volume
DL : price x budgeted sales volume
VO : price budgeted sales volume
CM: Total sales -Total variable costs
For one month
divide amounts by 12
Flexible Budget on Actual Profit and loss for one month
Cost of sales : standard cost price x budgeted sales volume
Sales : Budgeted sales price x Actual sales volume
DM : price x Actual sales volume
DL : price x actual sales volume
VO : price actual sales volume
CM: Total sales -Total variable costs
FC: FC/12
Gross profit : CM- FC
Actual Profit and loss Statement
Sales : Actual price x actual sales volume
DM: production amount x DM Actual price
DL: hours used x DL rate per hour
VO: same figure given
/12 = for month
we can use the direct material in production because production output is the same as the actual sales volume
Variance
DM Quantity Variance Standard price x(Quantity -Standard quantity )
Voh spending variance = SVR x actual -standard
VOH efficency variance = SVR x actual - standard (actual dlh= packaging and processing together )
Total budget variance = Actual P/L -Static budget
Price /efficiency variances= actual P/L - flexible budget
Sales volume variance = flexible budget -static budget
Significance level =total budget variance /static budget
Standard quantity for dm variance = standard quantity per bucket x actual output
DL variance = Actual P/L x (actual p/l per hour - standard P/L hour/rate
DM Variance = Standard price x(quantity -standard quantity )
Dl standard hour = standard dlh x actual output
FOH budget= standard fixed overhead rate x standard quantity - budgeted foh
budget : volume of production/sales
e budget : actual budget of production sales
e variance : difference between the flexible budget and the actual figure
tic budget & Flexible budget : variable per student x budget enrollment
budget variance : Actual - Static budget
able : Actual less than static budget
avourable : Actual greater than static budget positive variance = unfavourable
negative variance : favourable
static budget variances
-1,950 facourable
2,000 unfavourable compare: the static budget is based on 800 students whereas flexbile budget i
50 unfavourable Whereas flexible budget variance tells us more about how much the variable c
Flexible Budget variances
-1460 favourable
2,000 unfavourable
540 unfavourable
ters per lot
Volume variance
90,000
60000 Fixed overhead: total fc/ budgeted output
15000 Then :price x quantity
0
165000 P &L Sales : budgeted sales price x budgeted sales volume
Flexible budget
DM: direct materials x Actual output
DL: Direct labour x Actual output
Variable overhead : VO x Actual output
Fixed overhead : fixed overhead x 12months
Volume Variance :Static budget - flexible budget
DL + DM= VARIABLE OVERHEAD
as the actual sales volume
essing together )
ereas flexbile budget is based on 730 students. The flexible budget variance is based on difference in enrolment .
ow much the variable cost has changed . This indicates the flexbile budget hasthe flexible budget gives us a is higher quality to i
rence in enrolment .
get gives us a is higher quality to investgiate further on what has happened.
