Reminders

Question 1

When calculating absorpbed cost of a unit

Answer 1

Dont forget to include direct labour. I used direct labour hours per unit to absorb indirect costs but forgot to cost the direct labour itself in..

Question 2

when using multiple % adjustments order doesnt matter

Answer 2

100 x 10% + x 3% + x 4% -
100 x 4% - x 3% + x 10% +
..same answer

Question 3

when preparing a cash forcast .. watch out for..

Answer 3

An expenses amount with a depreciation element included. Need to take out the depreciation amount as this doesn’t go in CF

Question 4

*** Need to do a bit work suggesting performance indicators

Answer 4

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Question 5

when breaking out 12 month budget watch out for…

Answer 5

..fixed costs … is it a month or a week (been caught out here)

Question 6

when calculating best product when theres a limiting factor

Answer 6

1. Calculate the contribution normally
2. Then divide contribution / qty of limiting factor req.

(Can do either with totals or per unit , shd be same)

Question 7

in osborne wb when given 2 original budgets .. where labour and OHs were clearly not variable … the answer was that they were semi variable and to use HiLo method…. im not sure how could be sure they werent stepped fixed :-(

Answer 7

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Question 8

Types of budget:
Incremental
Flexible
Rolling
Activity based.

Answer 8

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Question 9

Types of pricing:

Price skimming; penetration pricing; Standard pricing; Cost plus pricing

Answer 9

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Question 10

when selecting which budget(s) a cost belonged in I forgot it should usually be in 2 budgets with the 2nd being Cash budget (excepting depreciation)

Answer 10

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Question 11

be very careful when doing budgets to know exactly what a figure is … units or £££s …

Answer 11

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Question 12

when calculating sub-contracting requirements…

Answer 12

watch out for whether being asked for hours or units in answer

Question 13

when completing a materials schedule 9osborne) and calculating the COST column …item ‘used in oroduction’ … remember…

Answer 13

…dont calculate this form number of units used in production at purchase price… this doesn’t work !!!
Need to either work out the opening inventory cost per unit and then use both that and the cost per unit of the new purchases and calculate the total using FIFO assumption… or else just use the figures in the £ column and use OI+P-CI=COGS formula.

Question 14

need to analyse the osborne textbook answers where composing an email and try and work out a structure

Answer 14

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Question 15

product design royalties are a direct cost (osborne)

Answer 15

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Question 16

when adjusting an operating budget to build a cash flow note that depreciation included in OB needs to be removed… also that the phrase ‘other OHs include an increase in non-cash provisions of £5K’ did mean that the £5K was to be deducted

Answer 16

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Question 17

when calculating budgets for labour watch out for..

Answer 17

workrs having a guaranteed minimum

Question 18

when calculating material usage when given requirement in units (eg sales budget) watch out for OI & CI being given in units…

Answer 18

…if increasing the stock of units remember to change the difference into material requirement.. ie dont make mistake of calculating the material required for sales figure and then adding on the extra units required for stock… need to calculate the total in units and then convert into material requirment for that total.

Question 19

Remember about the Hi Lo method..

Answer 19

You have to pick out the highest and lowest records and use these …. NOT the top and bottom ones !!!!
Then use one or other of these for calculating the fixed element and check it against the other one.
NB: The other records do not necessarily calculate out.

Question 20

Remember with stepped cost eg labour is £5K to produce 3000 units….

Answer 20

Answer can only be a multiple of £5K ..

Question 21

Who is responsible for final approval of budget (Kaplan)

Answer 21

Board of Directors

Question 22

Which budget?

Incentives OR Commission OR Bonuses to sales staff ? (Kaplan)

Answer 22

Marketing

Question 23

Which budget?

New conveyor belt (Kaplan)

Answer 23

Capex

Question 24

Which budget?

Salaries or repairs engineers (Kaplan)

Answer 24

Maintenance

Question 25

Which budget?

Enhancements to production machines (Kaplan)

Answer 25

Capex

Question 26

Which accounting treatment?

Overtime premium OR Idle time pay for production workers

Answer 26

Charge to production in a Labour Hours Overhead Rate

Question 27

Which accounting treatment?

Basic pay for production workers

Answer 27

Direct cost

Question 28

Which accounting treatment?

Power costs for machinery

Answer 28

Charge to production in a Machine hours OH rate

Question 29

Which accounting treatment?

Depreciation of production equipment

Answer 29

Charge to Production in a machine hours OH rate

Question 30

When doing indices what to watch out for?

Answer 30

If doing 2 rows eg. forecasting volume with one index then on the next row doing a price index. I did the price index calc based on the ROUNDED forecast volume which meant my rounding was not always the same as Kaplans.

I would need to have worked along the columns, putting in the rounded volume figure but keeping the unrounded figure open in my calculator and doing the price index from that.