Budgeting

We use the change in the inventories of finished goods in order to calculate how many units of each product we produce. When we know how many of each product we produce, then we can calculate how much wood and varnish we need to use. To calculate how much wood and varnish we need to purchase, we take the amount of wood and varnish we need to use and adjust by the change in the inventory of wood and varnish.

Thanks for your reply . Btw , chapter 17 and 18 will solve questions from budgeting , budgetary process and making budget work in BPP ? As the title is different so I'm a little bit confused ... Thanks Mr John.

1- Question 10a 13 from BPP Can you pls explain why the answer of this question is option D ( B8+B7+B4) ? when sale - variable = contribution The answer should be A ( B2-B3 ) ? 2- Question 10 a11 and 10 a12 In chapter absorption and marginal costing , we take contribution cost p.u multiply with budget unit , but we multiply with actual unit in these ones ? Thanks Mr John

I cannot comment on the way BPP separate their questions. Our lectures cover everything needed to be able t o pass the exam well. Q10A 13 The contribution is the sales less all variable costs, as I explain in my lectures. Not just the variable production costs. Q10a11 and 12 The questions ask about the flexed budget profit, which is the standard profit for the actual sales.

Question 10b.8 I've already calculated the budgeted production of competition units . And I m starting to be confused with that allowance for defective units 1.600 . I don't understand " 10% of output = 1/9 of input ) That 10% should be 1.440 ? Should I understand the word " allowance " is like the " allowance" in F3 ? Thanks Mr.John

For every 100 units that are produced, 10 are defective and therefore only 90 will be kept. So for every 90 they end up with, 10 will have been rejected and 100 will need to be made. They need to end up with 14,400 units. So it will mean that 10/90 x 14,400 (= 1,600) will have been rejected, and they actually need to produce 100/90 x 14,400 (= 16,000). No - it is not the same as allowances in Paper FA. It simply means that they need to produce more because they know that some will end up being defective (and, of course, you do not need to use any word to describe it in the exam!).

Oh thank you . You've made the rest of all related questions is much easier ... Question 10b.18 from BPP When we calculate fixed overhead , why do we subtract depreciation of $2280 from fixed production overhead cost incurred ? As depreciation is also fixed overhead cost ? Should it be included ? Thanks Mr. John

It is because the question asks what the payment is (i.e. how much cash will be paid). Although depreciation is indeed a fixed overhead cost, it does not involve the payment of any cash.