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  2. Hello sir ,
    I have a doubt regarding the flexed budget. Can you tell me what figures you found in the flexed budget? . Please help me to clear this doubt.

  4. Hi John,

    Example 2 also asks to summarise in a form suitable for management – I’m guessing that this would be in the format of an Operating Statement?

    Do you work through this format somewhere in the next lecture on budgeting?

    • They have always been in the syllabus, but you don’t really need more for the exam than being aware what a cash budget is (which is dealt with in the lecture) and a bit of common sense.
      If you want more then look at the F5 lectures where there is a worked example, but the chance of getting much if anything in Paper F2 are small.

  8. Dear Sir,

    Firstly, thank you for all these lectures which are extremely helpful.

    You lost me during the F2 video in which you did exercise on p. 83, example 1d. For the cost of material purchase, you seem to have multiplied wood and varnish by their unit price, $8 and $4 respectively. However, the question is about how much 26 300kg of wood and 14700l of varnish cost. So, surely, we should not be multiplying these quantities by the per unit costs of $8 and $4, but rather by the per kg and litre costs of wood and varnish?

    Thank you in advance.

    Ps. I tried to post this in ask the tutor but it would not post.

  9. Thank you open tuition for your great assistance in lectures and course notes. Since i have the opportunity few weeks ago, i have benefit a lot of ideas that was never known to me before. Thank you once more and bravo to you all.

  11. Great lecture. Was previously worried when I didn’t see the solution to the examples in chapter 15 in the course notes and the definition of the different types of budget. The lectures has addressed my concerns. Thanks

    • I am sorry but I have no idea which examples you are asking about – depreciation has nothing to do with budgeting in Paper F2.

      I suggest that you watch the F3 lectures on deprecation and if you still have problems then ask in the Ask the Tutor forum and not as a comment under a lecture on something completely different.

    • The volume variance is the difference between the original budget profit and the flexed budget profit.
      The original budget profit is 120,000. If you flex the budget for sales of 100,000 units, you get a flexed profit of (10,000) (I.e. a loss of 10,000). So the volume variance is 110,000 (adverse)

      The expenditure variance is the difference between the flexed budget profit and the actual profit. The flexed profit is a loss of (10,000); the actual profit is 5,000 and so the variance is 15,000 (favourable).

      (This question is a bit naughty of Kaplan. Firstly because it should really be in the variances section rather than the budget section, and secondly because ‘expenditure’ variance isn’t really the correct name.)

  15. Sir, how to work this out?
    A company manufactures a single product. Budgeted production for the first three months of next year is as follows :
    Month 1 :8k units
    Month 2 : 9k units
    Month 3 : 7k units
    Each unit uses 4kg of raw material costing $5 per kg. The budgeted raw material inventory at the end of each month is to be 20% of the following months production.
    What are the budgeted raw material purchases for month 2 of next year (in $’s)?
    (answer is $172,000)

    • Opening inventory for month 2 = 20% x 9,000 = 1,800
      Closing inventory for month 2 = 20% x 7,000 = 1,400
      So production in month 2 = 9,000 + 1,400 – 1,800 = 8,600

      So raw materials = 8,600 x 4 a 5 = $172,000

      • We sell 9,000. We start with 1800 in inventory, so that means we only need to produce 9000 – 1800. However we would then end up with no inventory at the end, but we want to have 1400 in inventory, so we need to make an additional 1400.

        Sales units are always equal to opening inventory + production – closing inventory.

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