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- This topic has 7 replies, 2 voices, and was last updated 6 years ago by John Moffat.
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- May 29, 2017 at 10:55 am #388752
As i looked at your video on operating stating under both costing method you used sales budget , but kaplan text book made me confused , under the marginal costing approach it says for
Budgeted contribution (budgeted production * budgeted contribution/unit),could you please tell the reason why they using budgeted production instead of budgeted sales.
May 29, 2017 at 11:26 am #388754@nitishthapa said:
As i looked at your video on operating statement under both costing method you used sales budget , but kaplan text book made me confused , under the marginal costing approach it says for
Budgeted contribution (budgeted production * budgeted contribution/unit),could you please tell the reason why they using budgeted production instead of budgeted sales.
May 29, 2017 at 4:48 pm #388806The operating statement i am asking is related to variance analysis
May 29, 2017 at 6:18 pm #388825The budgeted contribution is always the budgeted sales multiplied by the budgeted contribution per unit.
If you have copied the statement from your text book correctly, then it is only true if the budgeted production is equal to the budgeted sales (and as a result no change in the inventories). Otherwise it is wrong!May 29, 2017 at 6:48 pm #388830Thanks sir, the reason i got confused is they have given this (Budgeted contribution =(budgeted production * budgeted contribution/unit), in the format but any way i am crystal clear for it.
May 29, 2017 at 7:08 pm #388833I have one more question sir,
there is question in kaplan text book
Riki Ltd. produces and sells one product only. The standard cost price for one unit being as follows:
D Mat A- 10 kg at $12/kg – $120
D Mat B- 6 kg at $ 5 /kg – $30
D wages 5 hr at $ 8/hr – $ 40
Fixed prod. o/h – $60
Total standard cost – $250
Std. gross profit – $ 50Std. selling price -$300
The fixes production overhead included in the standard cost is based on an expected monthly output of 750 units . Riki Ltd. use an absorption costing system.
Actual sales unit is 700 units.
Sales 700 @ $ 320 -$224000
Direct material :
A-7500 kg – $91500
B -7500kg – $ 20300Direct wages 3400hrs – $ 27880
Fixed production o/h – $ 37000
Total – $ 176680Gross profit – $47320
Notes: Riki Ltd does not hold any inventories
Required
You are required to reconcile budgeted profit with actual profit for the period., calculating the following variance
Selling price, sales volume, material price, material usage, labour rate, labour efficiency, fixed overhead expenditure and fixed over volume.
My Question- . They are using 750 units to calculate budgeted profit , but there is no mention 750 as budgeted sales, could you please tell why they using 750 as budgeted sales figure, there is not given any units figure except 750 and 700.
May 29, 2017 at 8:16 pm #388851I think i found the solution for my question the reason they using 750 unites is as mention in NOTES: Riki Ltd does not hold any inventories – this shows that they sell all they produce which means 750 is budgeted sales.
If i am still wrong could you please tell me the reason ? ThanksMay 30, 2017 at 9:13 am #388925You are correct. If there are no inventories, then the budgeted sales will equal the budgeted production.
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