Tag: Production

The table shows an annual budget for Alex Ltd:

• units produced – 20,000
• direct material – £80,000
• direct labour – £120,000
• variable overheads (at 100 % of prime cost) – £200,000
• fixed costs – £280,000
• Total costs – £680,000

As the actual production is only 16,000 units, Alex Ltd produces a flexible budget.

What is the revised total budgeted cost?

Select ONE answer:

1. £320,000
2. £560,000
3. £600,000
4. £640,000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct – (£80k / 20,000 * 16,000) + (£120k / 20,000 * 16,000) = £160,k * 2 (100% of prime costs) + £280k FC
4. Not correct

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