ACC08702 Managerial Finance Assignment Questions | ENU

Assignment

• Selling and distribution overheads are partly fixed and partly variable. The fixed element in the budget is $60,000. The semi-variable costs were budgeted to have the following pattern.

Sales units	$
Up to 194,999	18,000
195,000-204,99	20,000
205,000-214,999	23,000
215,000-224,999	26,000
225,000-234,999	30,000
235,000-244,999	35,000

• Administration overheads are fixed.
• A standard selling price of $3 was set for the year.

Required:

• Restate the above profit statement, showing a flexible budget column and recalculate the variances.
• Write a report to the Managing Director interpreting your revised statement and giving the advantages of flexible budgeting over fixed budgeting for control purposes.

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Tutorial Exercise 3.8

Corporate Consulting Services operates a flexible budgeting system. The following information was obtained to produce the draft budget for the next budget period:

• The average charge-out rate of the company’s consultants is expected to be $100 per hour. However, this rate will increase by 10% if the company’s consultancy work exceeds 18,000 consultancy hours, since the company will have to employ freelance consultants to undertake additional work.
• Travel and subsistence expenses are expected to average $10 per chargeable consulting hour.
• The average annual salary of the 12 consultants employed by the company is $60,000 per annum. The consultants, who are employed on annual fixed contracts, provide a maximum of 1,500 hours per annum.
• Freelance consultants are paid $55 per hour