Flexed budgets

Comments

• Diddy Mau Well-Known Registered Posts: 238

  August 2012

  I would say flex to 19,500 as this is actual made. 21000 is total amount that can be made and held.
  If I'm wrong, I'm sure someone else will correct me

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• amyjayne27 Trusted Regular Registered Posts: 314

  August 2012

  Dixon Digital produces the TB100, a computer component, and has asked you to analyse the performance of their manufacturing division as this is facing increasing competition from overseas suppliers.
  
  You have been given the following budgeted and actual data fot the year ended 30th September 2010:
  
  Budget Actual
  
  Sales Volume (units) 19000 19500
  Sales Revenue £ 370500 370500
  *
  Costs £ £
  
  Materials 57000 60900
  Labour 125200 133600
  Power 34300 37500
  Depreciation 69000 68900
  Factory Rent 24000 25000
  Other Overheads 10000 8000
  
  Cost of Production 319500 333900
  *
  Less Closing Stock (23850)
  Cost of Goods Sold 319500 310050
  
  Operating Profit 51000 60450
  The following is also relevant:
  
  Budgeted production was 19000 units whilst 21000 units were actually produced.
  Material is a variable cost.
  Budgeted labour cost includes a fixed element of £15000 and the actual fixed cost was £16000.
  Budgeted electricity cost fixed element was £5800 and the actual fixed cost was £6000.
  Depreciation included a budgeted variable element of £1.00 per unit but the actual variable cost was £0.90 per unit.
  All other overheads are a fixed cost.
  Closing stock has been valued on an absorption cost basis.
  Required
  
  a) Calculate the following:
  
  £
  i) Budgeted selling price per unit.
  ii) Budgeted material cost per unit.
  iii) Budgeted variable labour per unit.
  iv) Budgeted total variable electricity cost.
  v) Budgeted depreciation fixed cost.
  vi) Actual selling price per unit.
  vii) Actual material cost per unit.
  viii) Actual variable labour per unit.
  ix) Actual total variable electricity cost.
  x) Actual depreciation fixed cost.
  b) Using the template, prepare a revised operating statement on a marginal costing basis.
  
  This is the question, I do not want the answer I just want to understand it, it's so frustrating as I really thought I understood it. I have filled out to (v) fine, it's when it comes t the actual output questions I don't know if to use the 19500 or the 21000. And with the fixed costs, I have never had 2 figures before I.e. budgeted ad actual.
  
  Thanks in advance

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• NicF Well-Known Registered Posts: 108

  August 2012

  Hi Amy
  
  The two figures are different because the top figure is sales where as the figure in the text is the amount actually produced so you have closing stock. You need to select the appropriate actual figure to find the values you need. So for vi you would use the actual number sold to calcualte the actual sales price per unit. The other variable costs you would use the actual number of units produced to calculate the actual costs per unit. Depreciation is a fixed cost so you just use the actual cost.
  
  Hope this helps.
  
  Nicola

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• amyjayne27 Trusted Regular Registered Posts: 314

  August 2012

  Thanks Nic, so when you mean for vi I need to calculate actual numbers sold this is 19500? So in the questions with 'actual' it is referring to the 19500? Do I flex my budget to 21000 units then?
  
  Thanks
  
  Edited to add - I have calculated those questions v - X okay, now with the Operating statement does the flexed budget need to show 21000 units? And the actual to show 21000 units or both to show 19500 units? Many thanks so far

  

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• amyjayne27 Trusted Regular Registered Posts: 314

  August 2012

  Thanks for everyone's help, I think I have cracked it finally!
  
  Just a question am I likely to see a question like this in the exam or is it in the more simple form of just budgeted and actual and flexing the budget to the actual units?
  
  Thanks again

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