Figure 16-5
Torino, SA., manufactures machine parts. Torino has developed a static budget for its plant at an activity level of 10,000 direct labour hours for the month of March. The actual level of activity was 11,000 hours. The following table summarizes the static budget and the actual costs for March: $\begin{array}{lccc}
&\text { Static Budget } &\text { Actual Costs }\
& (10,000 \mathrm{DLH})& (11,000 \mathrm{DLH}) & \text {Variance}\
\text { Variable costs } & £ 21,000 & £ 22,000 & £ 1,000 \mathrm{U} \
\text { Fixed costs } & 7,800 & 7,700 & 100 \mathrm{~F} \
\text { Total } & £ 28,800 & £ 29,700 & £ 900\mathrm{U} \
\end{array}$
-Refer to Figure 16-5. What is the flexible budget for March?
A)£28,800
B)£29,800
C)£30,900
D)£31,680

Question

Figure 16-5
Torino, SA., manufactures machine parts. Torino has developed a static budget for its plant at an activity level of 10,000 direct labour hours for the month of March. The actual level of activity was 11,000 hours. The following table summarizes the static budget and the actual costs for March: $\begin{array}{lccc}
&\text { Static Budget } &\text { Actual Costs }\
& (10,000 \mathrm{DLH})& (11,000 \mathrm{DLH}) & \text {Variance}\
 \text { Variable costs } & £ 21,000 & £ 22,000 & £ 1,000 \mathrm{U} \
 \text { Fixed costs } & 7,800 & 7,700 & 100 \mathrm{~F} \
 \text { Total } & £ 28,800 & £ 29,700 & £  900\mathrm{U} \ 
\end{array}$  
-Refer to Figure 16-5. What is the flexible budget for March?
A)£28,800
B)£29,800
C)£30,900
D)£31,680

Quizplus · Accepted Answer

The flexible budget adjusts the static budget to the actual level of activity. For variable costs, the flexible budget is calculated as (Actual DLH/Static DLH) * Static Variable Costs = (11,000/10,000) * £21,000 = £23,100. Fixed costs remain the same at £7,800. Therefore, the flexible budget total is £23,100 + £7,800 = £30,900.

Figure 16-5 Torino, SA -Refer to Figure 16-5

Figure 16-5
Torino, SA -Refer to Figure 16-5