PCR Section 2.2

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Correct me if I am wrong but task 2.2

"Prepare an operating statement to show the flexed budget for the actual production, the actual results and the resulting variances for the year ended
30 November 2006."

The question is a flexed budget question and on the question paper it shows that actual volume is 60,000units so why is the flexed budget based on 72,000 units??

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PCR Section 2.2

    Where did you get 72,000 from?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PCR Section 2.2
    SandyHood wrote:
    Where did you get 72,000 from?

    PLEASE IGNORE ME... MY Day is getting from bad to worse, I stupidly clicked the link on your out of office thinking it was already the examiners report and it was June 2006 examiner report. What a noose.

    Many apologises to anyone who read this and panicked. Think I am in panick mode now cause I know I need this unit under the belt to sit CIMA in May.

    Angel x
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PCR Section 2.2

    There was only one thing that threw me which was Task 2.1 (iii).

    Labour was a Semi-Variable cost, yet the wanted you to calculate the variable cost per unit. There was nothing in the Data which indicated how to split the variable from the fixed amount.

    Then the next question asked to calculate the total labour fixed cost.

    The other thing I couldn't get at the time was why they had the two draft budgets. I assumed that one was the original based on sales and production being the same and the other was with stock adjustment of 20,000 units.

    From this I made all my calculations to complete 2.1 (a).

    Did anyone else have the same problem?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PCR Section 2.2

    Hi Howlettbrian,
    To calculate the fixed and variable parts for labour you needed to use the "high/low" method
    £2700,000..............100,000
    (£2300,000).............(80,000)
    £400,000...............20,000
    Then divide £400,000 by the 20,000units, giving 20
    Multiply this 20 by the lowest budgeted units, in this case 80,000 to give the variable cost of £1,600,000
    Take this amount from the total costs for 80,000units ie, £2,300,000 leaving £700,000, this would be your fixed element of the cost.
    You would then check this against the highest budgeted units. £2,700,000 - £700,000= £2,000,000
    £2,000,000/20=100,000
    You then needed to "flex" the budget to the actual amount of 60,000units sold to allow you to compare "like with like".
    I hope this helps! :D


  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PCR Section 2.2

    Hi Chelle,

    Thanks for the info. I imagine that using the High-Low is the way to also determine the variable costs for the light, heat & power plus insurance, rent & rate.

    It's a shame that when being taught this on Revision course they forgot to mention that there may be a situation of using the high/low method for this task.

    If I remember right I worked on the 20,000 units concept and the difference between the two costs for each Semi-Variable cost, but am unsure if I then multiplied the amount by the lowest units.

    Nothing that can be done about it now, just have to hope that when marking the paper the examiner can see where the logic was coming from even if the actual answer was incorrect.

    Failing that, it's back for more in Jun '07.

    Thanks

    :oops: :| :thumbup:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PCR Section 2.2

    No probs hun !
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PCR Section 2.2

    not any info but i was glad to read your posting, i made a complete hash of this question, then of course the answers had to be used to calculate the next part, arghhhhhhhhhhhh!!! :?

    big juicy F for me!

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