Page 238 - Microsoft Word - 00 ACCA F2 Prelims.docx
P. 238
Chapter 13
A company planned to produce and sell 1,000 units and had a direct
material budget of $5,000 but they only produced and sold 900 with a
direct material cost of $4,800.
It looks like the company has spent less on material than it had budgeted,
Budget Actual Variance
$5,000 $4,800
However, this is not comparing like with like, the actual cost must be compared to the
flexed budget.
Budget Flexed budget Actual Variance
1,000 units 900 units 900 units
$5,000 $4,500 $4,800
The difference between the actual and the flexed budget is known as the budget
variance.
232
