1. avatar says

    Hi Sir, for the example 2 in this lecture, we used a marginal costing approach, in the exam should we expect the examiner to ask use to use an absorption costing approach as well? Thanks and needless to say awesome lecture :D

  2. avatar says

    Hi John, I have 2 questions about pratice question 9 Judi:
    1. I don’t understand what does it mean by skilled worker turnover is non-existent and semi-skilled worker turnover rate is quite high. Do you mean that skilled workers are pernament staff and the company has to pay whatever they have job to do or not, and semi-skilled workers are changing from time to time?
    2. in the answer notes, variable overheads: I don’t understand where is this from : 5hr/batch @ $4/hr=320

    Thank you very much!

    • Avatar of johnmoffat says

      The relevance of the turnover of the workers is that because the skilled workers are not leaving and being replaced, they will learn and the learning effect will apply to their time.
      However, since the semi-skilled workers keep leaving and then being replaced, we assume that they are not there long enough to learn and so their time per unit will stay unchanged.

      With regard to the variable overheads, since the semi-skilled workers are not getting faster – their time stays at 5 hours a batch. The overheads for that part of labour will be 16 batches x 5 hours a batch x $4 per hour.
      (Sorry – the figure is correct, but the workings could have been typed better!)

  3. avatar says

    Hi … why we didnt copy the direct figures of costs given for actual production of 12000 units i.e labour cost in question is 28500 and we took 30000…why not the sameee 28500?

    • Avatar of johnmoffat says

      Did you watch the whole lecture?

      Because we did copy the actual costs (28500 etc) in the ‘actual’ column!!!

      The flexed budget was rewriting the original budget for the actual level of production and sales, so that we had something sensible to compare the actual costs with in order to check whether we were over or under spending.

      • avatar says

        yeah! sorry! i got confused at flexed budget and paused the lecture to ask my doubt but as soon as i continued i almost understood there was actual budget for that but thanks alot for making things clear about flexed budget :D

  4. avatar says

    Hello John, I have a question about practice question 7 light plc (d) material purchase budgets: as we have calculated the production budget on (b) which are 900, 2000 and 450 respectively, certainly we should purchase the material based on the production: plastic usage 19650m+20%closing inventory 3930m.
    I don’t understand the answer in the notes, why do you go back to calculate the purchase based on sale volume again, not actual production volume? Thank you.

    • Avatar of johnmoffat says

      The purchases have not been based on the sales volume.
      Only the closing inventory has been based on the sales because the question says that we wish to have enough inventory of raw materials to be able to copy with 20% of the demand (the sales demand).
      So……the inventory has been calculated as being enough to cope with 20% of sales.
      Then the usage has been adjusted for the inventory in order to arrive at the purchases.

  5. Avatar of mario123 says

    Sir. Two topics: Methods of budgeting (incremental & zero-based) and behavioral aspects of budgeting (participation + target setting & motivation + responsibility accounting + management by objectives) are covered in the notes but not talked about in the lecture. What kind of questions are expected for these topics? I’m sure they must be part of syllabus..

  6. avatar says

    does it mean that when doing flexed budget we always only consider Level of activity figure to come up with the figures for costs? plus if i heard well you said f9 instead of f5 otherwise its a very great and helpful lecture… keep it up!

  7. Avatar of fabiangrey says

    When flexing budgets do we only breakdown fixed costs on a per unit basis for absorption costing? (flexing fixed costs as well as all other costs). Many thanks for you help in advance!

    • Avatar of johnmoffat says

      Normally you would use marginal costing, in which case you do not flex the fixed overheads. If we are using absorption costing then we do flex the fixed costs (and it is this that causes the complications with the fixed overhead variances when using absorption costing).

    • Avatar of johnmoffat says

      Yes – of course you can be asked to prepare rolling budgets because it is in the syllabus.
      However she will not asking anything complicated – it will just be testing that you do understand what a rolling budget is!

  8. avatar says

    Nice lecture.. thanks sir… but it would be more helpful if it would have contained how to prepare rolling budget and activity based budget as it is part of the syllabus now.

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