Question

No hand-writing or photo please clear tables

Give a numerical example for explaining how the flexible budget is prepared

Answer 1

example of flexible budget is budget which show difference between fixed cost, variable cost and semi variable cost at difrerant level of activity.

EXAMPLE: suppose a factory operate at 14000 hours at 70% level of activity.the other information as follow:

variable expenses	$2520
semi variable expenses	$2400
fixed cost	$3600

the semi variable expenses go up by 10% between the 85% to 95% activity and 20% by the above 95%activity. construct flexible budget at the 80.% ,90%,100% activity.

flexible budget as follow at different level of activity:

heads	70%[7000 hours]($)	80%[8000 hours]	90%[9000 hours]	100%[10,000 hours}
variable cost	2520	2880	3240	3600
semi variable cost	2400	2400	2640	2880
fixed cost	3600	3600	3600	3600
total cost	8520	8880	9480	10080
recover rate per hour	1.21	1.11	1.05	1.008

suppose at 70% hour is 7000 than for 80% =70-7000 what about 80%?

variable cost 70%- 2520
80%-? =80*2520/70=2880 same thing follow for 90% and 100%.

fixed cost are same all of level.

semi variable change as per the instruction given.