The following summary data are from a performance report for Washington Accounting Services: Accounting for Managers, Assignment, UOL, Singapore

QUESTION 5

The following summary data are from a performance report for Washington Accounting Services for May, during which 10,700 professional hours were worked. The ‘budget’ column reflects the company’s normal capacity of 10,000 professional hours per month. The managing partner is disappointed with the cost overruns.

Required:

1. What is a flexible budget and what is it used for?
2. Prepare a flexible budget report for May overheads. The report should include price and volume variance for each overhead? (Show all calculations)
3. Is the managing partner’s concerned valid, justify your answer? (Hint briefly outline the
   meaning of the differences, if any)