Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Revised Budget –BPP Study text
- This topic has 4 replies, 2 voices, and was last updated 4 years ago by ridhs.
- AuthorPosts
- July 19, 2019 at 7:26 pm #524364
Dear Sir,
Firstly thank u so much for all ur videos dey are of great help!
The following question appears in the BPP study text-Chapter Planning and operational variances. It has been asked to produce the original budget and a revised budget allowing for controllable factors in a suitable format. Its a very long question but m just mentioning the details of the part which m struggling with.
Sir, I could understand the entire solution except this particular piece of information.
please help in understanding why this discount part is not considered while preparing the revised budget.
A company produces Widgets and Splodgets which are fairly standardised products. The following information relates to period 1. The standard selling price of Widgets is$50eachandSplodgets $100each. In Period 1,there was a special promotion on Splodgets with a 5%discount being offered. All units produced are sold and no inventory is held.
as per the solution
original and revised budget for period 1 mentions the same sales revenue
Sales revenue((2,000 ×$50) +(500 ×$100)———–$ 150000
why didn’t they multiply 500 unit of Splodgets with $95 while preparing revised budget,as it was clearly mentioned that discount was offered as a part of special promotion.
look forward to hearing soon from you.
Thanks and Regards,
RidhimaJuly 20, 2019 at 9:00 am #524392I do not have the BPP Revision Kit (only the Revision Kit) and so although it does seem as though they should have used $95 and not $100 I cannot be certain with not being able to see the whole question.
July 21, 2019 at 8:32 am #524445Dear Sir,
Thanks a lot for your reply!
Sir, for your reference please find the complete question along with its solution as mentioned in the study text, and request you to please guide me what should be the correct selling price 100 or 95.
A company produces Widgets and Splodgets which are fairly standardised products. The following information relates to period 1. The standard selling price of Widgets is$50eachandSplodgets $100each. In Period 1,therewas a special promotion on Splodgets with a 5%discount being offered. All units produced are sold and no inventory is held. To produce a Widget they use 5kg of X and in Period 1,their plans were based on a cost of X of $3per kg. Due to market movements the actual price changed; if they had purchased efficiently, the cost would havebeen$4.50perkg.Production of Widgets was2,000units. A Splodget uses raw material Z but again the price of this can change rapidly. It was thought that Z would cost $30 per tonne but in fact they only paid $25 per tonne and if they had purchased correctly the cost would have been less, as it was freely available at only $23 per tonne. It usually takes 1.5tonnes of Z to produce 1Splodget and 500Splodgets are usually produced. Each Widget takes three hours to produce and each Splodget two hours. Labour is paid $5 per hour. At the start of Period 1,management negotiated a job security package with the workforce in exchange for a promised 5%increase inefficiency –that is,that the workers would make the Widgets and Splodgets in 95%of the time stated in the original budget. Fixed overheads are usually$12,000 every period and variable overheads are $3per labour hour. Required Produce the original budget and and a revised budget allowing for controllable factors in a suitable format.
Solution:
Original budget for Period 1 $
Sales revenue((2,000 ×$50) +(500 ×$100)) 150,000
Material costs X(2,000 ×5kg×$3) 30,000
Materialcosts Z(500 ×$30×1.5) 22,500
Labourcosts((2,000 ×3×$5)+(500×2×$5)) 35,000
Variableoverheads((2,000 ×3×$3)+(500 ×2×$3)) 21,000
Fixedoverheads 12,000Profit 29,500
Revised budget for Period 1 $
Sales revenue((2,000 ×$50) +(500 ×$100)) 150,000
Material costs X(2,000 ×5kg×$4.5) 45,000
Material costs Z(500 ×$23×1.5) 17,250
Labour costs((2,000 ×3×$5)+(500 ×2×$5))×0.95 33,250
Variable overheads((2,000 ×3×$3)+(500 ×2×$3))×0.95 19,950
Fixed overheads 12,000Profit 22,550
Sir, please suggest
Thanks and Regards,
Ridhima
July 21, 2019 at 10:00 am #524457I would have used a selling price of $95
July 21, 2019 at 10:11 am #524460gr8…thanks a lot Sir!!thank u so very much!
- AuthorPosts
- You must be logged in to reply to this topic.