Answer
The steps in developing a flexible budget are as follows:
Step 1: Identify the Actual Quantity of Output.
- Determine the actual level of production or activity achieved during the budget period.
Step 2: Calculate the Flexible Budget for Revenues Based on the Budgeted Selling Price and Actual Quantity of Output.
- Multiply the actual quantity of output by the budgeted selling price to calculate the flexible-budget revenues.
Step 3: Calculate the Flexible Budget for Costs Based on the Budgeted Variable Cost per Output Unit, Actual Quantity of Output, and Budgeted Fixed Costs.
- Calculate the variable costs by multiplying the actual quantity of output by the budgeted variable cost per output unit.
- Include the budgeted fixed costs to determine the total flexible-budget costs.
Work Step by Step
The steps in developing a flexible budget are as follows:
Step 1: Identify the Actual Quantity of Output.
- Determine the actual level of production or activity achieved during the budget period.
Step 2: Calculate the Flexible Budget for Revenues Based on the Budgeted Selling Price and Actual Quantity of Output.
- Multiply the actual quantity of output by the budgeted selling price to calculate the flexible-budget revenues.
Step 3: Calculate the Flexible Budget for Costs Based on the Budgeted Variable Cost per Output Unit, Actual Quantity of Output, and Budgeted Fixed Costs.
- Calculate the variable costs by multiplying the actual quantity of output by the budgeted variable cost per output unit.
- Include the budgeted fixed costs to determine the total flexible-budget costs.
