ExpertEasy2 marksShort Answer
ACCA · Question 22 · Budgeting
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)
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)
How to approach this question
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.
Full Answer
A flexible budget adjusts the variable costs to the actual activity level while keeping fixed costs constant.
Fixed costs = $20,000 (remains unchanged).
Flexed variable costs = 12,000 actual meals × $5/meal = $60,000.
Total flexed budget = $20,000 + $60,000 = $80,000.
Common mistakes
Flexing the fixed costs as well (e.g., multiplying the total original budget of $70k by 1.2 to get $84k).
Practice the full ACCA MA — Management Accounting Practice Exam 4
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