Chapter_10_Handout_Solution

Chapter_10_Handout_Solution - Acc 200 Chapter 10 Handout...

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Acc 200 Chapter 10 Handout Question : What is a static budget? Answer: A budget prepared at one expected level of production Is it fair to compare a static budget to actual results? See the following comparison. (Static Budget) vs. (Actual Results) @ 2,000 units @ 2,800 units Sales rev. \$200,000 \$280,000 VC: DM 18,400 27,000 DL 60,000 85,800 VOH 12,000 23,400 FC 30,000 30,000 Net Inc \$79,600 \$113,800 Question: What is a flexible budget? Answer: A budget prepared at the actual level of production. Instead of preparing a budget for the expected level of production (2,000 units), a flexible budget would provide the budgeted costs for the actual level of production (2,800 units). Is it better to compare a flexible budget to actual results? PREPARE A FLEXIBLE BUDGET (Flexible Budget) @ 2,800 units Calculations: Sales rev. \$280,000 \$200,000/2,000 units x 2,800 units VC: DM 25,760 \$18,400/2,000 units x 2,800 units DL 84,000 \$60,000/2,000 units x 2,800 units VOH 16,800 \$12,000/2,000 units x 2,800 units FC 30,000 No difference – this is a fixed cost Net Inc \$123,440 **Notice that fixed costs did not change – remember that total fixed costs do not change with changes in levels of production as long as the relevant range is the same.

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Question: What is a variance? Answer:
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This note was uploaded on 01/11/2011 for the course ACC 200 taught by Professor Buckless during the Winter '08 term at N.C. State.

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Chapter_10_Handout_Solution - Acc 200 Chapter 10 Handout...

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