Budgeting Exam - Help!
zippi
Registered Posts: 182 Dedicated contributor 🦉
Hi Everyone,
I would appreciate if someone could help me understand stepped costs in Flexed operating statement.
First Questions is Original budget for Equipment hire is 178,000 units is costing £24000. It says Equipment hire is a stepped cost, budgeted to increase at every 30,000 units of monthly production. I have to flex it to match Actual units of 192000. I understand when they are talking about 1 supervisor cost etc but large figure as these completely confuses me!
This question is from Budgeting book Sample assessment 1 Task 7. I have further questions but I will ask one at a time after one response.
Hope someone can help me!
I would appreciate if someone could help me understand stepped costs in Flexed operating statement.
First Questions is Original budget for Equipment hire is 178,000 units is costing £24000. It says Equipment hire is a stepped cost, budgeted to increase at every 30,000 units of monthly production. I have to flex it to match Actual units of 192000. I understand when they are talking about 1 supervisor cost etc but large figure as these completely confuses me!
This question is from Budgeting book Sample assessment 1 Task 7. I have further questions but I will ask one at a time after one response.
Hope someone can help me!
0
Comments
-
178,000 units will require 6 steps.
Each step is capable of producing 30,000 units
So divide 178,000 by 30,000 and round up
This is rather like deciding how many taxis (all capable of carrying 4 passengers) you need to transport 13 people. 13/4 rounded up to 4.
If you know the total cost (of your 6 steps) is £24,000 that is sufficient information for you to know the cost per step is £4,000.
Now go to the Actual Information (for the first time)
192,000 units will need 192,000/30,000 = 7 steps
7 steps at £4,000 per step = £28,000
I hope this helps
Yours
Sandy
sandy@sandyhood.com
www.sandyhood.comSandy
sandy@sandyhood.com
www.sandyhood.com1 -
Thank you Sandyhood, that makes perfect sense! I really appreciate your help. I didn't actually realise but when I did my first practice paper in BPP from question bank it explained there quite well but I think you just beat them by giving me a taxi example. smile:1
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