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December 4, 2022 at 11:07 am
Why are we calculating the closing inventory on actual results based on budgeted cost card not real cost card?
Thanks in advance!
July 28, 2022 at 5:56 am
Please guide why the standard fixed cost per unit taken the same (per unit) for flexed budget as well? It will increase the overall fixed cost if the units of Sales/production would be on higher side. However in true sense, the Fixed cost is to be fixed in total.
I understand that you mentioned in the lecture that you will guide us about this later but i guess it was missed in this lecture. Or may be i missed it.
John Moffat says
July 28, 2022 at 8:49 am
We only do this when using absorption costing.
I do explain this in the later lectures on basic variance analysis – this is only the first of several lectures on this chapter.
June 26, 2021 at 11:31 am
Dear John please assist with my previous post
June 26, 2021 at 2:15 pm
Sorry but no. There is no point in typing out a full question and expecting to be provided with a full answer. You must have an answer in the same book in which you found the question, so ask about whatever it is in the answer that you are not clear about (but ask in the Ask the Tutor Forum and not as a comment on a lecture).
June 26, 2021 at 10:34 am
where is a question that is being solved in a video? anyone please…
June 26, 2021 at 2:17 pm
As is stated at the start of every lecture, you should download our free lecture notes!!
You can find them linked from the main Paper FA page on this website.
November 19, 2020 at 10:33 am
Why did!’t you keep fixed overhead fixed while flexing the budget. It changed according to the no. Of units.
November 19, 2020 at 12:46 pm
If we had simply been asked to prepare a budget then indeed we would keep the fixed overheads fixed. However I flexed it in this example in order to explain why it is that with variance analysis using absorption costing, the sales volume variance effectively does flex fixed overheads. Later I explain how and why we therefore analyse the fixed overhead variance into an expenditure and a volume variance.
(Few questions are asked in Paper PM on this chapter – it was all examined in Paper FA (was F3) – but understanding this chapter is needed when it comes to the advance variances which are always asked in Paper PM.
August 21, 2020 at 4:42 pm
I hope you are doing well Actually I do too much appreciation to your lecture lesson, Thank you for your appreciated time, thank you so much,
June 3, 2020 at 5:59 am
Suppose if the question did not give production units; Say for example ;There is only sales units and the question directly gives the values of fixed budget as
Sales units :8000 Material :$156600 Labour : $217500 VOH:$87000 FOH:$130500 then the flexed Budget Material or labour or VOH or FOH calculates as follows..
Actual sales units: 8400 Material: $156600/8000*8400 Labour: $217500/8000*8400 etc..
Is it right sir??
Because currently with production units, we are doing
Material: $156600/8700*8900 so the difference of 200 units takes in to account. What if no production units and only sales units..
Please correct if above mentioned is wrong..
June 3, 2020 at 9:10 am
In future you must ask this sort of question in the Ask the Tutor Forum and not as a comment on a lecture.
Expense variances are calculation on units produced. If you are not told units produced then assume that are equal to the units sold unless, of course, you are told about levels of inventory.
June 3, 2020 at 9:27 am
Thanks a lot..
May 18, 2019 at 7:09 pm
Hello Mr. John thank you for the informative session
I just couldn’t get the entire third column as I thought we had already calculated the actual usage in the second column. I couldn’t also get from where we get 613200 in the third column.
last point what the difference we ‘ve mad in the fixed cost as we did treat is as normal cost just like the other costs we took the cost/unit into the total units produced and that is true because it is all about the No of units isn’t it?
May 19, 2019 at 11:18 am
Did you download the free lecture notes before watching the lectures, because the figures are given in the question.
February 25, 2020 at 6:51 pm
You use the standard cost for the actual units produced to obtain the flexed.
March 19, 2019 at 6:54 am
mmandangu: You are welcome 🙂
March 18, 2019 at 9:51 pm
Thank you Sir.
February 19, 2019 at 10:43 am
February 19, 2019 at 3:21 pm
You are welcome 🙂
November 24, 2018 at 10:03 am
Hello, I am unable to pick the sense of calculating closing inventory @ of total standard cost, can you please explain why we do it? Why we don’t compute closing inventory value by using actual total cost per unit?
February 19, 2019 at 3:24 pm
Variances in practice are usually calculated monthly. Some months costs might be a bit higher than standard, and some months they might be a bit lower than standard. It will be ridiculous to every month keep changing the value of the inventory.
Therefore in management accounts, it is normal to always value in the inventory at standard cost. (If things change a lot then they might decide to change the standard cost, but this is not relevant for Paper PM).
Remember we are not preparing financial accounts – we are doing management accounts which are prepared to help management run the business. In financial accounts we do value the inventory at actual cost.
November 10, 2018 at 12:30 pm
Thank you very much!
November 10, 2018 at 1:53 pm
Thank you for your comment 🙂
November 7, 2018 at 9:19 am
Thank you for this one
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