Page 326 - F2 - MA Integrated Workbook STUDENT 2018-19
P. 326
Chapter 13
Test your understanding 6
A
A flexible budget is designed to show the budgeted costs and revenues at
different levels of activity
Test your understanding 7
Quarter 1 Quarter 2 Quarter 3
Units 10,000 13,000 15,000
$ $ $
Direct materials 130,000 169,000 195,000
Direct labour 74,000 96,200 111,000
Production overhead 88,000 109,000 123,000
Administration overhead 26,000 26,000 26,000
Total budget cost allowance 347,700 421,700 455,000
Cost behaviour patterns need to be identified.
Examine the total costs – administration overhead is a fixed cost as the total
cost is constant as activity level changes.
Calculate the cost per unit – Direct materials and direct labour are variable
costs as the cost per unit is constant.
Production overheads must be a semi-variable cost as the cost per unit and
the total cost changes as activity level changes.
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