How To/Steps To Prepare A Bank Reconciliation Statement The following steps to prepare a bank reconciliation statement are as follows: When the bookkeeper received the Bank Statement he has to first check all the entries in the Cash Book for THAT PERIOD against the Bank Statement. All items appearing on BOTH the Cash Book and … Read more
(1) Costs for decision-making should be separated into their fixed and variable components (2) Fixed costs should not be averaged or absorbed when preparing information for decision-making (3) Marginal costing statements are useful for decision-making; absorption costing statements are not. (4) When a resource is scarce, it should be used in the way which produces the HIGHEST CONTRIBUTION PER … Read more
Costs can be classified in several different ways The total of the direct costs is known as PRIME COSTS The indirect costs of a business are also known as OVERHEADS Cost that vary with the level of economic activity are known as VARIABLE COSTS Cost that do NOT change with the level of economic activity … Read more
It is obvious that management needs to understand the sources where certain variances arises. Whether it is a favorable or adverse variance, the said variance need to be investigated hence the need to understand the sources from where the variances arises. Below is tabulated some of the major variances and its sources:- Variances Source Sales … Read more
Management besides reviewing all the expenditure variance also take great care to investigate any variances in sales revenue. This is because any variances in sales revenue has a direct impact upon the contribution and profitability of the business. In a marginal cost system, the variances are calculated in contribution terms whereas: In an absorption costing … Read more
Direct Material MIX Variance Measures the cost of any variation from the standard mix. Formula: [Actual Input Quantity-Budgeted material input quantity for the output produced] x [Standard weighted average cost per input unit-Standard cost per input unit] Direct Material YIELD Variance · A measure of the cost effect of the difference between the actual material … Read more
Fixed Production Overhead Variance: Is the difference between the PLANNED and ACTUAL FIXED production overhead incurred. The total fixed production overhead variance is: [Standard Fixed Production Overhead] Less:[Actual Fixed Production Overhead
How to prepare a Production Budget For the production manager to know how much to produce during the budgeted period, obviously he/she needs to know the sales budgeted. Only then can he consider the production capacity and also to take account the planned closing stocks of finished goods. Once the volume of production is ascertained, … Read more
The Sales Budget is the first budget prepared. It is derived from the sales forecast (estimate of sales revene for the budget period).Salient points about the Sales Budget: The formula is simple namely Sales Forecast=Quantities forecast X Selling prices It has a detailed breakdown by product,area,timing, volume and value. The detailed breakdown is to enable … Read more
Budgets can be broadly classified into two categories: Capital Budgets Operating Budgets WHAT IS Capital Budget: is concerned with the provision of resources for the long-term running of a business for example, the Capital Expenditure Budget WHAT IS Operating Budget: Is concerned with the DAY-TO-DAY operating activities of the business. Usually prepared for a normal … Read more