KAAF Co. Ltd deals in fashion clothing. The budget for clothing manufacturing for the year ended...
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KAAF Co. Ltd deals in fashion clothing. The budget for clothing manufacturing for the year ended 31 December 2016 had been: Sales 600,000 units @ $14.00 Less costs: Direct materials 2kgs per unit @ $1 per kg Direct labour 450,000 hours @ $7 per hour Fixed overheads Profit 2,250,000 Less costs: Direct materials 1,045,000 kgs @ $1.10 per kg Direct labour 385,000 hours @ $7.2 per hour Fixed overheads Profit 8,400,000 (1,200,000) (3,150,000) (1.800.000) The actual profit statement for the year ended 31 December 2016 is as follows: $ Sales 550,000 units @ $ 15.00 8,250,000 (1,149,500) (2,772,000) (1,900,000) 2,428,500 (a) Prepare a flexed budget for KAAF Co. for the year. (10 Marks) Note: The flexed budget should be consistent with the actual profit statement of 550,000 units of sales production. (b) Reconcile the original budgeted profit to the actual profit in as much detail as the information allows. (8 Marks) (c) Explain why budgets are flexed, using two examples to illustrate your explanations. (7 Marks) KAAF Co. Ltd deals in fashion clothing. The budget for clothing manufacturing for the year ended 31 December 2016 had been: Sales 600,000 units @ $14.00 Less costs: Direct materials 2kgs per unit @ $1 per kg Direct labour 450,000 hours @ $7 per hour Fixed overheads Profit 2,250,000 Less costs: Direct materials 1,045,000 kgs @ $1.10 per kg Direct labour 385,000 hours @ $7.2 per hour Fixed overheads Profit 8,400,000 (1,200,000) (3,150,000) (1.800.000) The actual profit statement for the year ended 31 December 2016 is as follows: $ Sales 550,000 units @ $ 15.00 8,250,000 (1,149,500) (2,772,000) (1,900,000) 2,428,500 (a) Prepare a flexed budget for KAAF Co. for the year. (10 Marks) Note: The flexed budget should be consistent with the actual profit statement of 550,000 units of sales production. (b) Reconcile the original budgeted profit to the actual profit in as much detail as the information allows. (8 Marks) (c) Explain why budgets are flexed, using two examples to illustrate your explanations. (7 Marks)
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a To prepare a flexed budget for KAAF Co for the year we need to adjust the budgeted amounts based on the actual sales production of 550000 units Flex... View the full answer
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