Task 1.4 - Cash & Revenues!! Help!!!

Sammmy88

I need some help!!

On task 1.4 apportionment.. I am really confused and stuck as to how to come up with the figures, and have seen the answers and baffled even more...

Please can someone help! And maybe more help on apportionment too!! Thanks!!

Jo Clark

Hello Sammmy88

What is the question for Task 1.4? Is it the practice CBA you are looking at or something in your course materials/text book?

I/others will be better placed to help if we know what the question is

Thanks.

JC

Sammmy88

Oh yeh sorry :-) it's the practice paper on the aat website.

Jo Clark

Hello Sammmy

I have just had a look at this paper and the question for task 1.4.

I'll try and explain how to calculate the figures for one element and then you can attempt the rest - you have my email address (I think) so can contact me there (or here) if you are still unsure and need further help...

Here goes...

I'll take the Depreciation of Plant and Equipment

The information provided in the question (on page 5) advises that the budgeted overheads for the next financial year for deprecation of plant and equipment is £804,150.

Also on the same page in the second table there is additional information. As we are calculating the depreciation we would do this based on net book value (NBV). We are advised that the NBV for plastic moulding is 5,600,000 and for plastic extrusion it is 2,400,000.

To calculate the apportionment of the budgeted overhead you need to take the amount detailed in the first table (budgeted overheads) and divide this by the total of the NBVs (5,600,000 + 2,400,000 = 8,000,000)

This gives us 804,150/8,000,000 = 0.10051875 then multiply by the NBV for each production centre e.g. 0.10051875 x 5,600,000 = 562,905 complete the same for the other production centre: 0.10051875 x 2,400,000 = 241,245. If ou add the two together the sum is that of the budgeted overhead - 804,150.

Alternatively you can skip the equals part and complete the sum as follows -

804,150/8,000,000x5,600,000 = 562,905
804,150/8,000,000x2,400,000 = 241,245


I hope the above helps you with completing these calculations. One tip is to make sure you read the information provided carefully. There is also some additional information provided after the second table on page 5.

Have a go and if you have any problems let me know!

JC

ykwong1978

Hi Sammy,

I did this similar but in a slightly different way.
Using a different example

I will look at the Rent and Rates which is 104,500

So, from viewing the options, we will decide to apportion this by Floor space

Floor space

Maintenance = 14,000
Stores = 8,400
Gen Admin = 5,600

Total floor space = 28,000

For me, I calculate the proportion of the floor space first

Maintenance = 14,000 / 28,000 (or 14 / 28)
= 0.5

Stores = 8,400 / 28,000 (or 84 / 280)
= 0.3

Gen Admin = 5,600 / 28,000 (or 56 / 280
= 0.2

We then find the apportionment to the rent and space (104,500).

Maintenance = 0.5 x 104,500
= 52,250

Stores = 0.3 x 104,500
= 31,350

Gen Admin = 0.2 x 104,500
= 20,900

And you can check the figures are correct by adding them together
52,250 + 31,350 + 20,900 = 104,500

This way, I found a lot easier, although if the figures do not divide into a manageable number (eg. 100 / 33) then this way is not recommended, and you will need to calculate this in one go

Maintenance = 14,000 / 28,000 x 104,500

Stores = 8,400 / 28,000 x 104,500

Gen Admin = 5,600 / 28,000 x 104,500


Hopefully, I have not confused you too much, and this makes sense to you, and good luck!

Sammmy88

Thanks guys! I get that now, however what about reapportioning it?

Jo Clark

Morning Sammmy

If you read the additional information provided below the second table you are advised how to reapportion the total costs from the production centres to the support cost centres.

For example - Reapportion Maintenance

The total for Maintenance is £164,950. You are advised that 76% of the maintenance cost centre’s time is spent maintaining production machinery in the plastic moulding production centre and the remainder in the plastic extrusion production centre. Therefore you need to calculate 76% of £164,950 (£125,362) and apportion to plastic moulding and the balance of 24% of £164,950 (£39,588) and apportion this to plastic extrusion.

You need to complete the same for the following:-

The stores cost centre makes 60% of its issues to the plastic moulding production centre, and 40% to the plastic extrusion production centre.

General administration supports the two production centres equally.

You are also advised that there is no reciprocal servicing between the three support cost centres.

I hope this helps.

Good luck for your sitting of the CBA, is it soon?


JC

Sammmy88

Oooooo!!! I get it now!! Finally it comes to me!! Thank you so much for the help!! I think i'll do more practice on these!! :-)

Sammmy88

I haven't book my exam yet, as I am low on money, but will book it for early October so plenty of time to revise and start a new topic!! :-)

Sammmy88

Also got another query, which is probably really easy! Lol. On question 2.4 on the AAT paper for the budget variances, I've had a go but my answers are all wrong. I thought you just use the material given enter them into the chart and worked the variance but they have different figures and have no idea how they worked them out.

For example: for sales revenue I thought it would be 2,000 (as this is what they have in the above table) but they have 2880 as the answer and I am confused as to how they came to that figure!?

Jo Clark

Hello Sammmy

The sales revenue figure is calculated as follows:-

Using the figures provided in the table you need to take the

£2,000 (Budget Sales Revenue) divide by 100,000 (Budget Volume Sold) and multiply by 144,000 (Actual Volume Sold) = £2,000/100,000=0.02 0.02 x 144,000 = £2,880. The variance being £720 Favourable (£3,600 (Actual) - £2,880 (Flexed)).

Apply this to materials, labour, overheads etc. HOWEVER remember to read the additional information provided below the table...

Both direct materials and direct labour are variable costs, but the overheads are fixed

Complete the table below to show a flexed budget and the resulting variances against this budget for the year. Show the actual variance amount, for sales and each cost, in the column headed ‘Variance’ and indicate whether this is Favourable or Adverse by entering F or V in the final column. If neither F nor V, enter 0.

I hope this helps


JC

ykwong1978

Task 2.4

Hi Sammy,

For task 2.4, they provide you with the budget for the volume sold which is 100,000.
The actual figure is 144,000 so they want to know whether the budget is Favourable or Adverse if the budget is flexed to this figure.

To do this, we need to flex the budget figure to match the actual figure.

For me, I take the ratio which I find is easier to work out, and just multiply this number to all the figures.

Actual Volume Sold / Budget Volume Sold = 144,000 / 100,000 = 1.44

So now, to work out the flexed budget you multiply by this number

Flexed Budget

Volume Budget = 100,000 x 1.44 = 144,000

Sales Revenue = 2,000 x 1.44 = 2,880

Direct Materials = 350 x 1.44 = 504

And so on

Also, as the Overheads is fixed this will be 980