Flex Budgets

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:26AM in AAT student discussion
I am having difficulty getting my head around when to use amount produced and when to use the amount sold as a dividing factor for Ques 1 section 2. Also when to include closind stock value.has anybody any easy ways of remenbering it.

Jackie

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Flex Budgets

    Hi Jackie

    I had a bit of difficulty learning this bit, but as I went through this, it make logical sense.

    The rule with marginal costing on flexed budget is that you produce the actual based on number of unit sold.

    I haven't seen the question, but I have a good feel.

    Expenses are including when item are produced, therefore you should divide the variable cost by number of unit produced.

    Turnover are generated when units are sold therefore you should divide it by unit sold.

    Then you multiply the variable cost by the number of unit SOLD.

    Then you flex the budget figure to the number of unit sold as normal.

    A good way to check that your answer is correct is to divide your total variable cost (on your operation statement) by the number of unit sold and then multiply by the number of unit in closing stock.

    Take this figure off the closing stock figure given in the question. The answer is the fixed cost element absorbed in the closing stock and carried forward to next period in absorbing, but stay in this year in marginal.

    This should be the difference between the operating profit figure in the question and the operating figure you worked out.

    I hope you understand more about this type of question and good luck in the exam (and don't panic)

    Westcastle
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Flex Budgets

    Jackie

    My approach is different, but I am sure westcastle's would be good enough to get you the pass on section 2.
    And it is much simpler.

Categories

Privacy Policy