PCR/PEV revison thread

reddwarf

As this overlaps with MAC does anyone want to play revision game for PCR/PEV?

One person posts a question the person who posts correct answer (get debate going!) gets to post the next question. Sorry no other incentives!

jaimie

yep i will give it a go. you start

reddwarf

What is the format for the Sales Price Variance? And a short explanation too if you like!

reddwarf

Jaimie, did you see this?

SandyHood

Sales price variance can be either based on the profit margin (absorption costing) or based on the contribution (marginal costing).

Under absorption costing you would find the sales price variance by:

budgeted price less standard cost per unit times actual units sold
less
actual price less standard cost per unit times actual units sold

This would not be high on my list of topics to practice prior to the exam

reddwarf

Sandy thanks, it's an addendum in the Osborne book for Diploma route!

If anyone other than Sandy has time to play!!?? Would someone like to list the advantages and disadvantages of incremental and zero based budgeting?

jaimie

Sorry. forgot my password to log in.

I cant remeber these..can you please remind me?

Thanks

reddwarf

Okay I'll use this as a memory test, just briefly;

Icremental

Advantages

Easy, quick
Avoids re-inventing the wheel (as in zero based budgeting (which starts from scratch)
Only increment has to be justified, assuming historical figures are correct

Disadvantages

Uneconomic activities may be continued
Encourages building in budgetary slack (eg ask for extra £ so that budget is easy to meet)
Previous problems and inefficiences are not weeded out

Zero based

Advantages

Considered application on funds (ie, considerable thought is given to whether the activity warrants funding) (Decision packages)
Enforces prioritising
Encourages cost saving
A plan to work
Discourages budgetary slack
Doesn't perpetuate errors or uneconomic activities (as in incremental)
Looks at future needs not historical actions


Disadvantages

Mainly appropriate for service industries
Expensive
Time consuming
Stressful for managers!
May result in re-inventing the wheel


This is the roughly the Kaplan view other text books use different wording.

Your turn for a question Jaimie..