Budgets

Question 1

Budgets as a plan

Answer 1

-enables entities to plan the way in which objectives will be reached on a step by step basis
-detailed plan on why objective will be achieved

Question 2

Budgeting to control

Answer 2

-point of comparison against which to measure
-allows actual results to be compared against budgeted, enables entity to control operations
-correction action can be take to eliminate unfavorable divergencies from plan
-enhancement action can be take to build upon favorable divergencies

Question 3

why business produce plans?

Answer 3

1.aid the planning of actual operations- makes managers think about changes and what step to takes
2. co-ordinate the activities of the org- managers have to examine relations between their and other departments
3. communicate plans to various responsibility centers managers
4. motivate managers
5. control activities
6. evaluate performance of managers

Question 4

Budget tension

Answer 4

• planning data realistic, motivation- challenging
  budget should be fairb

Question 5

total Material Variance

Answer 5

(AQ X SP) - (AQ X AP)

Question 6

material usage variance

Answer 6

((actual unit * kg it takes to make 1 unit) - actual amount of kg used) * standard cost

Question 7

total Labour variance

Answer 7

(what the quantity of hours should of cost - what it actually cost)

use fucking units

Question 8

labour: efficiency variance

Answer 8

(( actual units * time it takes to make one unit) - actual total hours) * standard cost per hour

Question 9

VOH: total Price variance

Answer 9

(budgeted flexed voh for actual input- actual voh incurred)

Question 10

VOH: Efficiecny

Answer 10

((actual units * time it takes to make on unit (st) ) - actual hours) * standard cost per hour

Question 11

FOH

Answer 11

(Budgeted - Actual)

Question 12

Sales margin price variance

Answer 12

(standard selling price - actual selling price) x actual volume

Question 13

Sales Volume variance

Answer 13

(standard units - actual units) x contribution standard

Question 14

Total Sales variance

Answer 14

Actual sales- standard variable cost

Question 15

Standard cost advantages

Answer 15

-useful to compare budget vs actual outcomes
-highlights cost overruns for investigation
-tool for control of operations
-encourages improvement
-works well with IT applications

Question 16

Standard cost disadvantages

Answer 16

-complicated and time consuming
-can be discouraging
-need regular updating to reflect revenue and cost changes
-relatively inflexible
-may not be worth the cost

Question 17

strategy and planning process

Answer 17

1. establish objectives
2. identify potential courses of action
3. evaluate alternative strategic options
4. select alternative course of action
5. implement long-term plan in the form of the annual budget
6. monitor actual results
7. respond to divergencies

Question 18

MACS

Answer 18

MACS (managements accounting control systems

tend to be the pre-dominant controls in most organization because
1. monetary measure provides a means of aggregating results from dissimilar activities
2. profitability and liquidity are essential for company survival
3. financial measure enables a common decision rule to be applied
4. measuring result in financial terms enables managers to be given more autonomy

Question 19

core elements of MACS

Answer 19

Formal planning process- e.g. budgeting and long-term planning)
- for establishing performance expectations

responsibility accounting
- assigns differences from performance targets to the individual who is accountable for the responsibility centre

Question 20

MACS process involve

Answer 20

setting performance targets
measuring performance
comparing performance against targets
analysing variances and taking remedial actions

Question 21

responsibility accounting

Answer 21

implemented by issuing performance reports

Question 22

responsibility centres

Answer 22

1. cost or expense centre
2. revenue
3. profit
4. investment

Question 23

issues that must be addressed by responsibility accounting

Answer 23

1. distinguish between controllable and non-controllable items
2. determine how challenging the targets should be
3. determine how much influence managers should have in setting the targets

Question 24

Controllability principle

Answer 24

advocates that it is possible to charge a responsibility centre only those costs that can be influenced by the manager

Question 25

how does someone implement the controllability principle

Answer 25

eliminating uncontrollable or reporting controllable and uncontrollable items separately

Question 26

types of uncontrollable items

Answer 26

1. economic and competitive factors ( MACS shield partly from this as managers can some what control)
2. acts of nature
3. independencies where outcomes are affected by other units within the same org

Question 27

Material price variance

Answer 27

((actual weight used * sp for kg) - actual price)

Question 28

Labour price variance

Answer 28

((actual hours worked * stand hourly rate) - actual cost)