Adams Co manufactures one product whose output level varies from month to month. No inventory is...

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Adams Co manufactures one product whose output level varies from month to month. No inventory is held. Budgets for its minimum and maximum monthly output levels are given below, together with actual figures for November 2009. Output Sales revenue Less: Direct materials Direct labour Indirect labour Indirect materials Profit Cost Classification variable cost variable cost semi-variable cost fixed cost Budgeted minimum 20,000 units $ 400,000 240,000 50,000 15,000 6,000 89,000 Budgeted maximum 40,000 units $ 800,000 480,000 100,000 25,000 6,000 189,000 Actual 35,000 units $ 735,000 430,000 80,000 31,000 6,500 187,500 Required: (a) Prepare a flexed budget for an output level of 35,000 units. (b) Calculate revenue, cost and profit variances for November 2009 using the actual figures given and the flexed budget you have prepared. (c) Explain the meaning of the terms fixed budget and flexible budget and the importance of basing variance calculations on flexible budgeting principles. Adams Co manufactures one product whose output level varies from month to month. No inventory is held. Budgets for its minimum and maximum monthly output levels are given below, together with actual figures for November 2009. Output Sales revenue Less: Direct materials Direct labour Indirect labour Indirect materials Profit Cost Classification variable cost variable cost semi-variable cost fixed cost Budgeted minimum 20,000 units $ 400,000 240,000 50,000 15,000 6,000 89,000 Budgeted maximum 40,000 units $ 800,000 480,000 100,000 25,000 6,000 189,000 Actual 35,000 units $ 735,000 430,000 80,000 31,000 6,500 187,500 Required: (a) Prepare a flexed budget for an output level of 35,000 units. (b) Calculate revenue, cost and profit variances for November 2009 using the actual figures given and the flexed budget you have prepared. (c) Explain the meaning of the terms fixed budget and flexible budget and the importance of basing variance calculations on flexible budgeting principles.