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“Rolling budgets review and, if necessary, revise the budget for the next quarter to
ensure that budgets remain relevant for the remainder of the accounting period. ” (FALSE)Hello tutor!!
I want to ask why this statement is false ??Because if there is a need, we revise the next quarter/period
“Budgets can be used in situations where output cannot be measured, but standards
cannot be used in such situations ” (TRUE)Sir there is one more statement,
why is this statement is True ?
If we cannot measured outputs then how can we use and prepare budgets ?Q: Which one of the following best defines standard costing in a system of budgeting?
A) all activities are examined without reference to history each year
B) output level and costs are predetermined, actual results then compared with these
predetermined costs and variances analysedC) actual costs are compared with predetermined costs for the level of activity
D) costs are assigned to a manager in order that controllable and non-controllable costs
are accounted forI choose B but CORRECT ANSWER IS C
What’s the difference between option B & C and why C is correct not B ?
Q: When considering setting standards for costing, which of the following would NOT be
appropriate?A) The normal level of activity should always be used for absorbing overheads
B) Average prices for materials should be used, encompassing any discounts that are
regularly availableC) The labour rate used will be the rate at which the labour is paid
D) Average material usage should be established based on generally-accepted working
practicesC IS THE CORRECT ANSWER but I opt A which is wrong.
In the explanantion they are saying that due to idle time standard rate is different from paid rate but how ? because if we idle the labour we will surely pay labor for idle time then why in the example given in answer standard rate is $10 and paid rate is $9.
Please explain me this…
1. Rolling budgets are budgets that are always for a 12 month period. That does involve revising part of the existing budget but in addition adding on an extra quarter.
2. Budgets are budgeting for the expected costs. Standard costs are the budgeted cost per unit of output.
3. When calculating variances we always compare the actual costs with the flexed costs (i.e. the budgeted costs for the actual level of activity) and not with the predetermined costs.
4. A is not the answer because we do use normal level of activity when calculating the absorption rate for overheads.
C is the correct answer because we use the labour cost per hour worked when calculating the standard cost, which is not the rate at which labour is being paid if they are paying for idle time.I do suggest that you watch my free lectures, because all of the above is explained in my lectures.
Thank you sir
But in question#2 they are saying “standards cannot be used in such a situation where output cannot be measured”.
I’m not understanding this because I think we can make standard cost of unit without determining output level. Right ?
If NO then please explain me with an example.Here is an example. Think of a dentist. They can prepare budgets, but they cannot arrive at a standard cost because every work they do is different and the time taken will be different even for the same work (e.g. they remove teeth, they do fillings, but they cannot measure the output in the same way as if they are producing lots of the same goods).
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