Question 1

A hospitality company sets a budget for its catering division based on 10,000 meals. 
Budgeted fixed costs: $20,000
Budgeted variable costs: $5 per meal

During the month, the division actually served 12,000 meals. 
Calculate the total flexed budget cost allowance for the actual activity level. (Enter numbers only)

Accepted Answer

1. Identify fixed costs (these do not change with volume). 2. Calculate total variable costs for the ACTUAL volume (Actual meals * Variable cost per meal). 3. Add fixed costs and flexed variable costs together.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Flexing the fixed costs as well (e.g., multiplying the total original budget of $70k by 1.2 to get $84k).

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 4

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