PCR-Flexible Budgets.

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:26AM in AAT student discussion
Hi there, im having some trouble gettin my head around doing Flexible Budgets in chap 10 of the osborne book for PCR. When you have to set up statements for absorption costing and marginal costing, where there is closing stock. Any tips anyone? Im gettin in a bit of a muddle.

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PCR-Flexible Budgets.

    Pintpot

    If you go back over the past exam papers and the examiner solutions you will see these differ, mainly because of a slight difference in interpretation between the current examiner and his predecessor.

    The approach I use is very much the same as the current examiner, and I have gone through it with him at one of the sessions that AAT organise for lecturers to meet with examiners and discuss where the unit is going in the future.

    Layout the two statements - actual and flexed budget in columns showing clearly:
    the sales and production in units at the top

    the value of sales

    (and now the area I've found students find confusing)

    the cost of production

    the value of closing stock

    the cost of sales

    then gross profit (if an absorption costing question)

    then the other expenses

    and the operating profit

    Things are slightly different if you are using marginal costing as your cost of production is only the variable production cost and the value of the closing stock is also only the variable cost of production. But it is very similar.

    The way I have descibed allows you to pull out variances for:
    sales revenue
    all the production costs
    closing stock
    and
    all the expenses

    Does that make any sense?

    sandy.hood@chichester.ac.uk
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PCR-Flexible Budgets.

    Hi Sandy, thank you very much for taking the time to reply to me, it was very helpful, many thanks.

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