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A company produces trays of pre-prepared meals that are sold to restaurants and food retailers. Three varieties of meals are sold: economy, premium and deluxe.

Discuss the benefits of flexible budgeting for planning and control purposes.

Select all the true statements.

Options:

A fixed budget will provide meaningful control information when actual activity differs from budget and variable costs are significant.

If actual sales revenue is compared to a fixed budget it is possible to tell whether a favourable sales variance is due to an increase in units sold or an increase in sales price.

If sales volumes were well above budget, adverse variable cost variances will probably be reported, against the fixed budget, since more variable costs have to be incurred to support the higher level of activity.

Reporting against a fixed budget tells management nothing about the efficiency of operations.

If a flexible budget is prepared then the budget variances calculated will provide a better indication of performance since actual results will be compared against an appropriate benchmark.

The fixed budget however provides more insight into actual performance.

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Question 2

A company manufactures a single product. The following budgeted data applies to month 6:

What was the budgeted fixed production overhead for month 6?

Give your answer to the nearest whole $ (in '000s).

Options:

Question 3

A company's product range includes Product N. The costs relating to Product N are shown below:

The direct labour costs relate to specialists employed to work wholly and exclusively with Product N.

If the company stopped making Product N, the insurance overhead cost would cease, but overhead cost J would be unaffected. Both overheads are absorbed in direct proportion to material costs.

Which of the following costs should be used in the decision whether to stop making Product N?

Options:

$910,100

$850,000

$944,100

$884,000

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