Budgeting sample Assessments

ellie72

Hi, were can I find the workings to the AAT sample assessments. I keep getting confused with the variance analysis on the papers. Task 6b on both papers. & also Task 4, I'm having a blank moment, I've worked out the year 1 prices sales price index. How do I work out year 5 forecast? Thx

CeeJaySix

Hi Ellie,

I'm afraid they don't publish workings for the answers; however you can always ask here.

Task 6b on paper 1:

Standard direct labour cost of production = budgeted labour cost / budgeted production x actual production = 1,728,000 / 18,000 x 17,000 = 1,632,000

Labour rate variance = actual cost of actual hours for actual production - standard cost of actual hours for actual production
Actual cost of actual hours for actual production = 1,626,900 (from the question)
Standard cost per hour = 1,728,000 (budgeted cost) / 288,000 (budgeted hours) = 6
Actual hours for actual production = 280,500 (from the question)
Answer = 1,626,900 - 6 x 280,500 = 56,100 favourable (you know its favourable as the actual cost is more than the budgeted cost, ie. you've saved money)

Labour efficiency variance = standard cost of standard hours for actual production - standard cost of actual hours for actual production
Standard hours for actual production = 288,000 / 18,000 x 17,000 = 272,000
Actual hours for actual production = 280,500
Answer = 6 x 272,000 - 6 x 280,500 = 51,000 adverse (you can see it's adverse as it took more hours than budgeted, ie. it's cost you more money)

Labour cost variance = budgeted cost of actual production (which is the standard direct labour cost of production from the first line) - actual cost of actual production = 1,632,000 - 1,626,900 = 5,100 favourable (you know it's favourable as the actual cost is less than the budgeted cost, ie. you've saved money = good thing). This is made up of the rate and efficiency variances added together, so calculating it separately is a useful check that you have the other two right.


Task 6b on paper 2: material variances are exactly the same as labour variances (just different data) - so you should be able to figure it out from the above.


Task 4 on paper 2:

Indexes are straightforward: divide by the index at the date of your figure, and multiply by the date you want the equivalent figure for. So for example, the year 3 revenue in that question is 13,527. To get that back to year 1 prices, divide by the year 3 index of 120.0 and multiply by year 1 index of 110.0 = 12,400 (rounded).
To get the 5th year revenue figure, there's an obvious trend in the years 1-4 revenue at year 1 prices once you've calculated them. Extend this to give you year 5 revenue at year 1 prices. Then it's simply divide by the index at the date of your figure (in this case, year 1, as that's the equivalent you're working in) and multiply by the date you want the equivalent figure for (130.0).


Hope that helps.