# help..!! budgeting exam please

sgafo
Settling In NicelyPosts:

**21**Registered
Can anyone help me please I'm stuck on the following question

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sgafo
Settling In NicelyPosts: **21**Registered

Can anyone help me please I'm stuck on the following question

**_______________**

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118RegisteredI hope this is the right answer I did my budgeting exam nearly 2 years ago. (if not let me have the answers and I will work backward to give you the correct answers.

Budget Cost £1,728,000 / 288,000 hours = £6 per hour. 288,000 hours / 18,000 items = 16 items per hour.

Actual Activity at the Standard cost is:- (Standard Direct Labour cost of production)

17,000 items x 16 items per hours = 272,000 hours x £6 per hour = £1,632,000.

Labour Rate is:-

Standard cost £1,632,000 - Actual cost £1,626,9000 = £5,100 F. (This cost saving is due to it costing £5.80 per hour instead of £6.00 per hour).

Labour Efficiency is:-

Budget cost £1,728,000 - Standard Cost = £1,632,000 = £96,000 F. (This cost saving is due to production 1000 units less than budgeted for.)

Labour Cost is:-

Budgeted Cost £1,728,000 - Actual Cost £1,626,900 = £101,100 F.

782RegisteredLabour rate - 56,100 Fav

Labour efficiency - 51,000 Adv

Labour cost - 5,100 Fav

As I say (disclaimer), I'm only half concentrating so won't write out my workings until you confirm the answers are correct. If they are right, I'll explain my workings when baby is having a nap and I can concentrate!

2,034Registered, ModeratorLabour rate variance £56,100 favourable

Labour efficiency £51,000 adverse

Labour cost variance £5,100 favourable

There are different methods of finding variances.

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www.sandyhood.com

2,034Registered, ModeratorStandard direct labour cost of productionStandard labour cost of the goods produced

17,000 units x 16 hours/unit x £6/hour = £1,632,000

Labour rate varianceStandard cost of the hours worked - Actual labour cost

280,500 hours worked @ £6.00/hour - £1,626,900 = £56,100 favourable variance

Labour efficiency varianceStandard labour cost of the goods produced - Standard cost of the hours worked

17,000 units x 16 hours/unit x £6/hour - 280,500 hours worked @ £6.00/hour = £51,000 adverse variance

Labour cost varianceStandard labour cost of the goods produced - Actual labour cost

17,000 units x 16 hours/unit x £6/hour - £1,626,900 = £5,100 favourable

[email protected]

www.sandyhood.com

782RegisteredOP - A handy way to remember how to calculate variances.....

First of all, always flex your budget. And remember that most variances come in sets of 3

Then write out

AH x AR =

AH x SR =

SH x SR =

where A=actual and S=standard. The H and R will change depending on what variance you are looking at (in this case H=hours and R=rate). Your first variance of whatever type you are looking at is the difference between the first 2 answers, the second variance is the difference between the last 2 answers and the 3rd of the set is the difference between answers 1&3 (or the sum of the two variances you've just calculated).

By remembering this format, even if you can't remember the exact formulae for each variance, you can work out the three connected variances and then with a bit of common sense, figure out which answer relates to which variance.

This format also works for material variances (using quantity and price, instead of H & R), and variable overheads (using H&R again).

Have I explained that properly or have I just completely confused you? It makes sense in my head anyway!

214Registered214Registered1,461Moderator, MAAT, AAT Licensed AccountantI sat the exam last year so don't remember, however is it covered in your text book? Chances are, if it is, it is assessable and could come up at the exam.

214Registered