KAAF Co. Ltd deals in fashion clothing. The budget for clothing manufacturing for the year ended 31 December 2016…

KAAF Co. Ltd deals in fashion clothing. The budget for clothing manufacturing for the year ended 31 December 2016…

Question:

Don't use plagiarized sources. Get Your Custom Assignment on
KAAF Co. Ltd deals in fashion clothing. The budget for clothing manufacturing for the year ended 31 December 2016…
From as Little as $13/Page

Transcribed Image Text:

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)

Expert Answer:

Answer rating: 100% (QA)

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 550 000 units Fle
View the full answer