Question

ANSWER ALL QUESTIONS...

(1) "Describe the purposes/benefits of a Flexible Budget".

(2) "Contrast a Static Budget discussed in Chapter 9 to a Flexible Budget discussed in Chapter 11".

(3) "Discuss how the Variable Overhead Variances are determined".

(4) "Discuss how the Fixed Overhead Variances are determined".

  

Answer 1

Answer A :- benefits of a flexible budget:-

1.flexible budget can be adapted according to the changing position of the market and the industry.

2.helps in cost control because the manager can easily locate the deviations from the planned output with the actual output.

3.helpful in price fixation and sending quotations.

4.helps in budgetary control because it corresponds with the change in the level of activity.

B:-

BASIS	STATIC BUDGET	FLEXIBLE BUDGET
NATURE	static in nature and does not change with the actual level of output	flexible and changes with the level of activity.
CONDITIONS	assumes that conditions would remain static	prepared according to the changing conditions.
CLASSIFICATION OF COSTS	costs are not classified according to their variability i.e fixed , variable and semi- variable costs	costs are classified according to their variablity i.e fixed , variable and semi variable
COMPARISON	comparison between actual and budgeted performance cannot be done correctly if the output diferes	comparisons can be done correctly and realistic.

C. Variable overheads variances is the difference between the standard variable overheads for the actual output and the actual variable overheads incurred . it is calculated as :

( standard hours for actual output * standard rate )- ( actual hours * actual rate)

D. Fixed overheads variances it is calculated as:

standard fixed overheads - actual fixed overheads

{(standard rate * actual output)-(actual rate*actual output)}