Question 1

A public transport authority originally budgeted for 10,000 bus journeys in a month, with total variable fuel costs of $50,000 and fixed administrative costs of $30,000.

Due to a major sporting event, actual bus journeys were 12,000.

When preparing a flexible budget to evaluate performance, what should be the flexed budget allowance for total costs?

Accepted Answer

1. Find variable cost per unit. 2. Multiply by actual units to get flexed variable cost. 3. Add original fixed costs (they don't flex).

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Flexing the fixed costs as well as the variable costs (resulting in $96,000).

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 5

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