My query is regarding the preparation of summary financial statement showing the overall performance of a certain division.The performance of the division shows the variances for each month and its total.
I tried understanding the examiner’s working but got stuck on the part of cummulative budget to date and cummulative actual to date.
How did they arrive at these figures?
Your help would be highly appreciated.
Thank you in advance.
Not sure if I’m addressing your question but, for example, materials:
Budget production = 5,000 pm, so 30,000 for 6 months.
Actual production of 29,600 is given in the operating statement in the question.
The total variances are also given in the question eg 1,100 A Price and 22,000 A Usage.
The standard cost of materials for the actual production is 40 x 29,600 = 1,184,000. As both variances are adverse the actual cost must have been 1,184,000 + 1,100 + 22,000 = 1,207,100
Labour, variable overheads and fixed overheads handled similarly.
Yes its addressing that question.
So it means that to get the budgeted figures, you take the standard cost * total actual number of services?
Thanks alot sir. It makes sense if done that way.
Yes, for variances you need to ‘flex the budget’ to match the activity level.
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