A company's budgeted costs for 10,000 units are based on: variable costs £7.40 per unit; fixed costs £52,000; semi-variable costs of £18,000 plus £1.20 per unit. Actual output was 11,500 units. What is the total cost allowance in the flexed budget?

Correct answer: D) £168,900

Explanation

Variable costs = 11,500 x £7.40 = £85,100. Semi-variable costs = £18,000 + (11,500 x £1.20) = £31,800. Fixed costs stay at £52,000. Flexed budget total = £168,900. Fixed costs, and the fixed part of semi-variable costs, must not be increased in proportion to output.