6/23/2023 0 Comments Budget planning control![]() Secure request management Streamline requests, process ticketing, and more.Portfolio management at scale Deliver project consistency and visibility at scale.Content management Organize, manage, and review content production.Workflow automation Quickly automate repetitive tasks and processes.Team collaboration Connect everyone on one collaborative platform.Smartsheet platform Learn how the Smartsheet platform for dynamic work offers a robust set of capabilities to empower everyone to manage projects, automate workflows, and rapidly build solutions at scale.The management accountant estimates that every 1,000 units will take 14 hours to produce. The new battery will be manufactured on a machine currently owned by Corfe Co which was previously used for a product which has now been discontinued. The management accountant has said that a machine maintenance cost was not included in the flexible budget but needs to be taken into account. Supervision = $175,000 as five supervisors are required for a production level of 210,000 units. Material is $4 per unit and labour is $5.50 per unit, so total variable cost per unit is $9.50 Material and labour are both variable costs. A supervisor’s annual salary is $35,000.Īssuming the budgeted figures are correct, what would the flexed total production cost be if production is 80% of maximum capacity? Solution In addition to the above costs, the management accountant estimates that for each increment of 50,000 units produced, one supervisor will need to be employed. The company’s management accountant is currently preparing an annual flexible budget and has collected the following information so far: ![]() The maximum production capacity of Corfe Co is 262,500 units. The selling price of the battery is forecast to be $45. Flexed budget exampleĬorfe Co is a business which manufactures computer laptop batteries and it has developed a new battery which has a longer usage time than batteries currently available in laptops. However, some businesses may have a high level of indirect costs, making it difficult to separate fixed and variable costs from total indirect costs. Performance management can be more meaningful as actual results can be easily compared to flexed results – total variances can then be calculated for each revenue and cost. With flexible budgeting, managers will be able to plan and forecast more accurately. This flexed budget becomes a core part of financial control when using standard costing-the flexed budget answers the question, “What should our financial results be at the actual activity level?”įor more on this topic, see the Standard Costing section of your study materials. With this information, a flexed budget can then be created at the end of the budget period based on the actual activity level. Flexible budgeting happens at the beginning of a budgeting period-revenue, costs, and profit are forecast across a range of activity levels. using the high/low method to separate fixed and variable costs from a total costĮnsure you know the difference between these terms.incorporating the impact of a learning curve.You should be ready for complications on your PM exam, such as: ![]() With an understanding of revenue per unit and cost behaviours (ie fixed, variable, and stepped), financial results can then be budgeted within a range of activity levels. Total cost (y) = Fixed cost (a) + (Variable cost per unit (b) * Activity level (x)) A critical aspect of this approach is to determine fixed and variable costs, which can then be expressed as a linear equation: So instead of looking at only one activity level (which is called a ‘fixed’ budget - you should remember this from your previous studies), various activity levels are considered. Flexible budgetingĪ flexible budget is a summary of revenues and costs across a range of different activity levels. ![]() This series of articles will cover the budgeting approaches flexible budgeting, activity-based budgeting, rolling budgeting, zero-based budgeting, and beyond budgeting. Expect to see it in Sections A or B, and there is a fair chance of it appearing in Section C, so you need to be ready to handle 20-mark questions from both a numerical and a discussion-based perspective. It is a competency that must be acquired for anyone who is working in finance and accounting and is also a topic which is guaranteed to come up on your Performance Management (PM) exam. An introduction to professional insightsīudgeting is an essential part of planning, financial control, and performance management.Virtual classroom support for learning partners.Becoming an ACCA Approved Learning Partner.
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