Question

Bafta Ltd makes plasterboard panels (units).

The standard cost of making each panel in 2019 is as follows:

		£ per unit
Direct material (plaster)	(6kg per unit @ £1 per kg)	6
Variable Overhead	(0.1 hours per unit @ £20 per hour)	2

Budgeted sales and production in 2019 was1,000,000 panels (units), budgeted sale price was £12 per panel and the budgeted fixed overheads was estimated at £1,100,000 per annum.

Actual data for 2019 has been released as follows:

Sales and production units	1,100,000 panels (units)
Material Cost	6.1 kg per unit @ £0.6 per kg (6710,000 kg in total)
Variable overhead Cost	0.07 hours per unit @ £22 per hour (77,000 hours in total)
Fixed overheads	£1,112,000
Sales price	£10.50 per unit

What was the flexed profit?

Answer 1

A flexed budget is a budget prepared to show the revenues, costs and profits that should have been expected from the actual level of production and sales.

Actual Production - 1,100,000 panes (Units)

Direct material (Budgeted) - £6

Variable Overhead (Budgeted) - £2

Sales Price (Budgeted) - £12

Fixed Overhead (Budgeted) - £1,100,000

Flexed Sales revenue = 1,100,000 X £12

= £13,200,000

Flexed Direct Material Cost = 1,100,000 X £6

= £6,600,000

Flexed Variable Overhead = 1,100,000 X £2

= 2,200,000

Flexed Fixed overhead - £1,100,000

Flexed Total Cost = £6,600,000 + £2,200,000 + £1,100,000

= £9,900,000

Flexed Profit = Flexed Sales revenue - Flexed Cost

= £13,200,000 - £9,900,000

= £3,300,000