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Prepare an alternative presentation for the budget above that provides more meaningful information for control purposes
This question asks for you to prepare an alternative presentation for the budget, therefore prepare a budgetary control statement that shows static, volume and price variances. The following steps can be taken:
- Layout the budgetary control statement, clearly labelling each column and use a marginal costing format.
- Enter the fixed budget figures
- Calculate and enter the flexible budget figures. Remember both sales and variable costs should be the actual volume multiplied by the budgeted unit information but the fixed costs are left unchanged.
- Enter the actual figures. Remember to separate semi-variable costs.
- Calculate the variances
Some of the figures need to be calculated:
Fixed budget: variable operational overhead is operational overhead €1,305,000 x 20% while fixed operational overhead is 1,305,000 x 80%.
Actual operational overhead breakdown as fixed €1,044,000 (exactly as budgeted) and variable €304,000 (€1,348,000 minus €1,044,000).
To find unit figures simple divide the fixed budget amount by the budgeted volume
Budgetary Control Worksheet
|
|
Fixed |
Flexible |
Actual |
|
|
|
Budget |
Budget |
Results |
Variance |
Sales volume |
|
435,000 |
475,000 |
475,000 |
0 |
|
|
€ |
€ |
€ |
€ |
Sales |
€ 11.80 |
5,133,000 |
5,605,000 |
5,557,500 |
47,500 A |
Less variable costs |
|
|
|
|
|
Cost of sales |
€ 2.35 |
1,022,250 |
1,116,250 |
1,102,000 |
14,250 F |
Variable labour |
€ 1.65 |
717,750 |
783,750 |
798,000 |
14,250 A |
Variable overhead |
€ 0.60 |
261,000 |
285,000 |
304,000 |
19,000 A |
Sales commission |
€ 0.59 |
256,650 |
280,250 |
277,875 |
2,375 F |
|
|
2,257,650 |
2,465,250 |
2,481,875 |
|
|
|
|
|
|
|
Contribution |
|
2,875,350 |
3,139,750 |
3,075,625 |
264,400F |
Less fixed costs |
|
|
|
|
|
Operational overhead |
|
1,044,000 |
1,044,000 |
1,044,000 |
0 |
Administration |
|
865,000 |
865,000 |
878,000 |
13,000 A |
Marketing |
|
350,000 |
350,000 |
341,400 |
8,600 F |
|
|
2,259,000 |
2,259,000 |
2,263,400 |
|
|
|
|
|
|
|
Net profit |
|
616,350 |
880,750 |
812,225 |
195,875 F |
|
|
|
|
|
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