Budget and budgetary control
Sir in this question why we are comparing only the levels of activity for 8,000 units and 10,000 units for determining the type of cost (i.e. fixed cost, variable cost and semi variable cost) for every line item and not 6,000 units?
We are calculating what are the savings by applying the budgeted costs rate to the actual output in the flexible budget. Here, we take the budgeted cost less Normal cost divided by the difference between the budgeted output and the normal output. And after getting a certain rate we are applying it to the actual output produced in preparation of the flexible budget. Since this being a preparation of flexible budget, we calculate the actual performance at budgeted rates and so, we firstly compute the the budgeted and normal activity and then apply the resultant rate to the Actual production.