PCR

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  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    PEST Analysis
    Political
    Economic
    Social
    Technological factors that affect the performance of a product.

    Incremental Budgeting
    Traditional Method
    * Base next years budget on the current year + growth and inflation
    * Ok for salaries, rates, rent etc.
    * Does not interproate what is happening

    Zero Based Budgeting
    Involves preparing a budget for each cost centre from a "zero base" which means every item of expenditure has to be justified to be included.

    Programme Based Budgeting


    These bits are from my notes, i'll find out the rest and edit this in a mo :D

    Regards

    Dean
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    EvaG

    Here Goes:

    Incremental Budgeting:
    "Basing the budget for a department or function on that of a previous period, usually adjusting for inflation by a percentage increase" (Note: specific changes such as planned expansion or reduciton in activities would be allowed for to).

    Advantages:
    1. Budget is stable & change is gradual and planned.
    2. Managers can operate their department on a consistant basis.
    3. The system is relitively simple to operate and easy to understand.

    Disadvantages:
    1. Assumes activities & methods of working will continue the same way - no incentive to develop new ideas.
    2. No incentive to try and reduce costs -in fact spending up to the budget in encouraged so next years budget is in line with this years.
    3. The budget may become out of date - not relate to the level of activity any more.


    Programme Based Budgeting:
    "Breaking down the work of the organisation into 'programmes' designed towards acheiving goals"

    Points:
    - Several departments may contribute to a single programme.
    - Total funds shared between programmes.
    - Usually insufficient funds availiable to acheive all of the objectives, decisions have to be made as to which programmes have to be carried out and what level of work can be supported.


    Hope this is ok - I only have limited info on PBB, about half a page from my book.

    Stacey


  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    Dean,

    Can you clarify what the 'zero base' is?

    Thats one part i just dont get!
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    I can't get T accounts on the forum
    But look at the accounting system as inputs (debits) and outputs (credits)

    The Production Overhead account is debited with all the indirect costs of production for a dept.
    WIP is debited any absorbed overheads (when the Prod Ohd is credited).

    Product costs are made up of direct costs + absorbed overhead. So any overtime premium is not a product cost it is an overhead
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    My understanding of Zero Based budgets are that you prepare a budget for each individual cost centre i.e Production, packing etc. Using the justified expenditure.

    I take it what this means is that when you start to prepare your flexible budgets all your variances an ideal world should be ZERO.

    Regards

    Dean
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    From what i understand with Zero Base is that you forget past budgets and each section starts with no budget. Each department then has to apply for a budget for the year and justify the amount they are asking for.

    The disadvantage is the time it takes, but it means that departments have to keep costs down, find savings and obsolete programmes don't continue to get funding.

    That's in my own words, the books put it better. :D
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    Your words are clear and correct
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR
    SandyHood wrote:
    I can't get T accounts on the forum
    But look at the accounting system as inputs (debits) and outputs (credits)

    The Production Overhead account is debited with all the indirect costs of production for a dept.
    WIP is debited any absorbed overheads (when the Prod Ohd is credited).

    Product costs are made up of direct costs + absorbed overhead. So any overtime premium is not a product cost it is an overhead

    So what your saying is labour overtime is an indirect cost :?

    Regards

    Dean
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    memos could be
    Value Engineering
    Sampling
    Total Quality Management (TQM)
    Life Cycle
    Linear Regression
    Limiting Factors
    (As per deans post)

    I didn't know that these could come up??????

    I thought these were purely in the PEV Exam?

    Dam!
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    We thought marginal was just gonna come up in PCR not PEV! :lol:

    Hope you now feel better lol

    Regards

    Dean
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    Yeh cheers!!!

    To think i was actually celebrating in the car back from PEV exam that ABC, TQM & Value Engineering didn't come up!

  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    Lol, I aim to please :D :roll: :D

    Regards

    Dean
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    I am still confused as to what happens with regard to the overtime amount for labour hours?

    As per Toni's post!

  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    I'm still not entirely sure, although I think what Sandy is saying above is that overtime premiums are charge to revenue overheads and not production overheads.

    So when producing the "Total Cost of Production" this is why the premium is always left out and when you think about it the notes do always say that they are charged to "OVERHEADS" not "PRODUCTION",

    Regards

    Dean
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    When someone is doing overtime at say ร‚ยฃ6/hour + ร‚ยฃ3/hr overtime premium that person earns ร‚ยฃ9 per hour but only ร‚ยฃ6 is a direct cost of the product and the ร‚ยฃ3 o/premium is indirect
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    Gotcha!! Im with you now :D

    What I was saying Stacey was right :)

    Regards

    Dean

    p.s I'll be so glad when its all over!
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    Cheers that makes much more sense!
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    Am i the only one who thinks that the PCR paper has alot more content than PEV and hence takes longer to read & complete?

  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    I have a question...
    What do you do with closing stocks in the operating statement? Is that only in absorption costing?

    Also do you flex the budget on actual sales volume or production volume? I did a paper and my tutor told me production but in the answers it was actually done on sales?

    Thanks

    Laura :D
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    Laura if you read throught the whole of this topic it should answers your Q's

    Stacey
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR
    Stacey1 wrote:
    Laura if you read throught the whole of this topic it should answers your Q's

    Stacey

    Ha I've just seen this thread is 4 pages long! Sorry for that :shock:
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    Actually it will probably only answer your query regarding which volume to use.

    Can anyone else confirm which statement closing stock goes into?
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    As far as I understand, Marginal statments only include stock that was sold and no closing stock. I hope that's right otherwise I am going to make mistakes in the exam. :D
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    does anyone know about this & absorption statement?
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    Stock is used as a way of reporting profits so I would say that you may find it in the absorption statement.

    When you're flexing budgets your controlling costs so you dont need stock in anywhere.

    Regards

    Dean
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR
    Dean wrote:
    Stock is used as a way of reporting profits so I would say that you may find it in the absorption statement.

    When you're flexing budgets your controlling costs so you dont need stock in anywhere.

    Regards

    Dean

    Thanks Dean that has clarified it lots for me. Now you say it would seem inappropriate to include stocks in the flexed budget!

    I just want to clarify one more thing - you flex the budget to actual sales volumes regardless of whether you are preparing an operating statement using AC or MC methods? :?
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    I have a feeling feedback, feedforworward and any other backwards termonology might come up - linear regression for a start!!
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    Yes Laura that is my understanding.

    Regards

    Dean
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    Can i just check that when compiling the budgets for the first Section with regard to Material wastage you:

    Add materials wasted before production into the materials purchases budget.

    Add materials wasted during production into the materials usage budget (if there is one).

    And Add materials wasted after production into the production budget?

    Sound right?
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:PCR

    Many thanks to Dean and Stacey for explaining all that stuff - I will now try and digest.

    Thanks again
    Eva :D

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