Explain the difference between a fixed and flexible budget stating which one is more appropriate for budgeting control.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
1.a] Explain the difference between a fixed and flexible budget stating which one is more appropriate for budgeting control.
(b) The following details have been extracted from the
Kenyan shillings
Direct material 8.40
Direct labor 7.60
Variable overhead 3.90
Fixed overhead 5.10
total 25.00
The fixed overhead charges to each unit of the product is based on a monthly production and the sales of 2000 units. The budgeted selling price of product X is 35 Kenyan shillings per unit. During October the actual production and sales amounted to 2150 units and costs incurred and sales revenue achieved were as follows.
Kenyan shillings
Direct Material 18100
Direct Labor 14980
Variable overhead 8160
Fixed overhead 9950
Sales revenue 68800
Calculate the following variances
(i)Direct material total variances
(ii)Direct labor total variances
(iii) Overhead variance
(iv)Selling price variances.
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The following details have been extracted from the
Kenyan shillings
Direct material 8.40
Direct labor 7.60
Variable
Fixed overhead 5.10
total 25.00
The fixed overhead charges to each unit of the product is based on a monthly production and the sales of 2000 units. The budgeted selling price of product X is 35 Kenyan shillings per unit. During October the actual production and sales amounted to 2150 units and costs incurred and sales revenue achieved were as follows.
Kenyan shillings
Direct Material 18100
Direct Labor 14980
Variable overhead 8160
Fixed overhead 9950
Sales revenue 68800
Calculate the following variances
(i)Direct material total variances
(ii)Direct labor total variances
(iii) Overhead variance
(iv)Selling price variances.
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