VARIABLE overhead variances comprises: · Expenditure variance and · Efficiency variance CAUSES OF VARIABLE EXPENDITURE OVERHEAD VARIANCE: For Variable Expenditure variance, the reasons are: 1. price changes in overhead items; 2. inaccurate estimates of one or more item comprising variable overhead; 3. efficiency or inefficiency in the use of the variable overhead 4. inadequate control … Read more
OVERHEAD VARIANCE is The DIFFERENCE between the Actual Overhead Incurred and the amount of overhead absorbed to production through the use of a standard overhead rate. – For the VARIABLE overhead, the standard rate is computed by taking the budgeted variable overhead of the period divided by the budgeted volume for the period. – For … Read more
The administration of budgeting is documented in a budget manual. It contains the purpose of, procedure for and responsibility of the people involved in budgeting. More details as follows: The objectives of the business and the part which budgetary control plays in achieving these objectives; The procedures to be adopted in operating the budgetary control … Read more
The steps are: (1) Select a budget period: the length of the budget period depends on the kind of plan being made. Some budget periods will follow the natural cycle time, for example, one year for a sales budget. Other budget periods may be determined by management, for example five years for capital expenditure budget. … Read more
Many medium to large organization have a budget committee, made up of executives from each department, to co-ordinate and review the departmental budgets in relation to the company policies. However to make budgeting to be successful top management must be involved in the administration of budgets. The chief executive must bear the ultimate responsibility for … Read more
The key features of a budgetary control systems are: Setting attainable objectives; Assigning executive responsibility; Planning the activities to achieve the objectives; Comparing actual results against the plan; Taking corrective actions and Reviewing and revising plans in the light of changes.
Question:You have joined an old established manufacturing business of medium size which has recently expanded rapidly beyond the capacity of its existing accounting system.Your immediate task as instructed by the board of director will be to prepare and introduce a system of budgetary control.You are required to set out clearly: (a) the problems you are … Read more
Earlier article dealt with definition and types of overhead.However, why the need to classify overhead costs? Some justifications are appended below: Classification enables an analysis to be made of overhead costs, under the nature of the item, the type of service provided and by department, cost centre, process and others … Read more
Question: The following details are from the wages office records for week ending 30 June : $ Value of cheque drawn for net wages 10,380 PAYE deductions 1,792 Subscriptions To Recreation Club 58 National Insurance:employee 947 National Insurance:employor 984 Answer to above Question Journal Debit Credit $ $ 30/6 Wages Expense A/c 14,161 Social … Read more
Questions 1. Give details of the effect of high labor turnover on costs & show the steps that could be taken in an effort to reduce cost 2. Describe the various method which could be employed in a factory to record attendance time and the time spent on individual job. 3. Relate the functions and … Read more