Budgeting tomorrow!!!

Jade95

Hi all!

So, it is the half term, oh and guess what? The college have booked an exam. YAY! :glare:

Been doing the online CBA's and its looking ok, the only thing that i am unsure on is the second written question really.

One thing that has popped up a lot is Budgetary Control. Am i right in saying that it is the way that the business/ management control their budgets. I'm not too sure, any help would be qppreciated. :001_smile:

Oh, andanother question is in 1.4, i've used CBA 3 as an example;
Budgeted Units Year May
Units Sold 286000 25000
Units Produced 288000 25200

Each unit uses 1.25Kg of material costing £0.80 per Kg
It takes 5 minutes for each item
1800 basic hours available and extra is overtime
Basic hour rate is £10 overtime is basic rate plus 50%
Variable overheads relates to labour hours, including overtimes hours
Fixed overheads are incurred evenly.

THE ONLY ONE I AM STUCK ON IS THE VARIABLE OVERHEADS.

The variable overheads for the year are 36000

I need to work out what they were for may, any ides?

The AAT got 3150

Thankyou in advance.

SandyHood

One thing that has popped up a lot is Budgetary Control. Am i right in saying that it is the way that the business/ management control their budgets. I'm not too sure, any help would be qppreciated.

I don't know what "it is the way that the business/ management control their budgets" means.
Budgetary Control is the "after-the-event" production of budgets, so that actual performance can be compared and variances produced.
Look at your work on flexed budgets typically based on the actual output or actual sales that took place in the period.

Your next question relates to variable overhead. I would have thought that if you got the labour value, variable overhead would follow on


Budgeted Units Year May

Units Produced 288000 25200

It takes 5 minutes for each item
So the budgeted labour hours per year are 288,000 units x 5/60 = 24,000 hours
At £36,000/24,000 hours the OAR is £1.50 per hour
In May your budgeted production is 25,200 units which = 25,200 x 5/60 = 2,100 hours
This gives a budgeted variable overhead cost of 2,100 x £1.50 = £3,150 in May

Surely you needed the 2,100 hours to work out the labour cost?

Jade95

Thank you for that, still unsure on budgetary control i think i know it but in different terms.

Jade