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Differences between standard cost and estimated costs
- Standard cost is a specification of what costs should be while estimated cost is merely a
reasonable approximation of what costs will be.
- Standard costs are fixed scientifically after a carefully done time and motion study of the
factors making up the cost whereas estimated costs are based on average of past actual costs,
adjusted for expected changes.
- The objective of standard cost is cost control whereas estimated costs are used as a guide to
fixing prices.
- Standard costs are used as a regular system from which variances are calculated while
estimated costs provide statistical data for future costs.
marto answered the question on February 26, 2019 at 06:10
- To manufacture a standard product, 10 units of material are required at a standard price of Sh.80
per unit. The actual production for the period was...(Solved)
To manufacture a standard product, 10 units of material are required at a standard price of Sh.80
per unit. The actual production for the period was 10,000 units. From the cost records it was
found that 105,000 units of materials were actually consumed at a price of Sh. 75 per unit.
Required;-
i) Calculate the material cost variance.
ii) Reconcile material cost variance with material price variance and material usage variance.
Date posted: February 26, 2019. Answers (1)
- Kuuda Limited manufactures one standard product. Currently, it is operating at a normal level of
activity of 70% with an output of 6,300 units, although the...(Solved)
Kuuda Limited manufactures one standard product. Currently, it is operating at a normal level of
activity of 70% with an output of 6,300 units, although the sales director believes that a realistic
forecast for the next budget period would be at a level of activity of 50%.
Required:
(i). Prepare a flexible budget based on a 50% level of activity.
(ii). State three problems which may arise from such a change in the level of activity.
Date posted: February 26, 2019. Answers (1)
- Identify the limitations of using budgeting systems to regulate business activities.(Solved)
Identify the limitations of using budgeting systems to regulate business activities.
Date posted: February 26, 2019. Answers (1)
- State the objectives of budgetary planning and control systems.(Solved)
State the objectives of budgetary planning and control systems.
Date posted: February 26, 2019. Answers (1)
- Mavuno Ltd. is a small scale company that specializes in the production of farm tools.
The company uses budgets for planning and controlling its activities. Currently...(Solved)
Mavuno Ltd. is a small scale company that specializes in the production of farm tools.
The company uses budgets for planning and controlling its activities. Currently the management are
preparing budgets for the three months ending 31 March 2006.
The projected balance sheet as at 31 December 2005 is shown below:
Additional information:
1. The company sells the farm tools at a mark up of 25 %.
2. Purchase of materials stocks is on credit and it is paid for in the month of receipt by the
company
3. Employees are paid wages at the end of every week with the earnings of the last week of the
month being settled in the following month (Assume one month has 4 weeks).
4. Sales commission is paid on month in arrears at the rate of 1% of sales.
5. Overheads include a monthly depreciation charge of Sh. 25,000.
6. 25% of the sales are on cash basis. The other 75% is receivable two months after the sale.
7. The company will receive a loan of Sh.2, 500,000 in the month of March 2006 from Wakulima
Bank.
8. Old equipment will be sold for sh.250, 000 in February 2006 and new equipment will be
purchased at Sh.1, 200,000 to replace the old equipment sold. The new equipment will be paid
for in month of March 2006.
9. Rent is paid for quarterly in advance in the months of January, April, July and October
Required:
(a) Cash budget for the three months ending 31 March 2006.
(b) Budgeted trading profit and loss account for the three months ending 31 March 2006
(c) Budgeted balance sheet as at 31 March 2006.
Date posted: February 26, 2019. Answers (1)
- Kikwetu Enterprises is a firm operating in the textile industry.
The budgeted sales for the fabric “S” for the month of August 2006 are 20,000 units...(Solved)
Kikwetu Enterprises is a firm operating in the textile industry.
The budgeted sales for the fabric “S” for the month of August 2006 are 20,000 units at a selling price
of Sh. 4,000 per unit.
Additional information:
1. For the production of one unit of output of fabric “S”, the following two components of inputs are
used:
4. Factory overheads absorbed into unit cost on the basis of direct labour hours. The budgeted
factory overheads for the month are given as Sh.3840, 000.
5. The administration, selling and distribution overheads for given month are budgeted at
Sh.11,000,000.
6. The company plans a reduction on 50% in quantity of finished stock at the end of the month and
decrease of 25% in the quantity of each input component.
Required:
(a) For the month of August 2006
(i). Production quantity budget.
(ii). Material usage budget
(iii). Material purchase budget
(iv). Direct labour cost budget.
(b) A budgeted profit and loss account
Date posted: February 26, 2019. Answers (1)
- Mashauri limited operates a budget system. The following is the company's profit forecast for a
six month period ending 31 August 2007:(Solved)
Mashauri limited operates a budget system. The following is the company's profit forecast for a
six month period ending 31 August 2007:
Additional information:
1. The cash book showed an overdrawn balance of sh. 43,000,000 on 1 June 2007
2. Plant installation costs amounting to sh. 60,000,000 are due to in August 2007 while a loan
repayment from a debtor of sh. 16,000,000 falls due in June 2007
3. Factory expenses are paid one month after they are incurred by the company
4. One eight of the wages amount is paid months in arrears
5. Three months rent is payable in advance on the first day of each quarter
6. Payment for raw materials is made two months after delivery
7. Two months credit is taken on advertising expense.
8. Administration expense are payable in the month in which they arise
9. A dividend and tax thereon will be paid in July 2007 amounting to sh. 50,000
10. Debtors are allowed three months credit
11. Sales commission is paid one month in arrears.
Required:
i) Cash budget for the period between 1 June 2007 and 31 August 2007
ii) State the control measures that the management should put in place in order to improve the
cash position of the company.
Date posted: February 26, 2019. Answers (1)
- Distinguish between the following sets of terms:-
i) Budgetary slack an principal budget factor
ii) Pudding the budget and rolling budget(Solved)
Distinguish between the following sets of terms:-
i) Budgetary slack an principal budget factor
ii) Pudding the budget and rolling budget
Date posted: February 26, 2019. Answers (1)
- Dream Wheels limited is in the process of reviewing its master budget for the six months ending 31
December 2009
The statement of financial position for the...(Solved)
Dream Wheels limited is in the process of reviewing its master budget for the six months ending 31
December 2009
The statement of financial position for the year ended 30 June 2009 is as follows:-
Additional information
1. The selling price from May 2009 to September 2009 was sh. 6,000 per unit. The price
increased to sh. 8,000 per unit from October 2009
2. 50% of sales are paid in cash and 50% are sold on credit
3. Credit sales are paid two months after the month of sale
4. Purchase are paid two months after the month of purchase
5. Wages and salaries are paid 75% in the month in which they are incurred and 25% in the
following month
6. Overheads are paid one month in arrears
7. Fixed assets worth shs. 30 million were purchased during the month of October 2009. The
amount is to be paid in three equal monthly installments commencing January every year.
8. Depreciation on fixed assets is at the rate of 10% per annum on a straight line basis. A full
year's depreciation is provided for fixed assets owned as at 31 December every year.
9. Shares worth sh. 20 million were issued through the stock exchange during the month of
September 2009
10. The value of closing stock as at 1 July 2009 was equal to the previous purchases
11. Dividends worth sh. 10 million relating to year 2009 will be paid to shareholders during the
month of December 2009
Required:
Revised cash budget for six months period ending 31 December 2009
Date posted: February 26, 2019. Answers (1)
- Highlight six requirements for the efficient operation of a budgetary control system.(Solved)
Highlight six requirements for the efficient operation of a budgetary control system.
Date posted: February 25, 2019. Answers (1)
- Kimani and Otieno who are in partnership, wish to prepare a budget for material requirements.
They have requested for your assistance and presented the following information:
1....(Solved)
Kimani and Otieno who are in partnership, wish to prepare a budget for material requirements.
They have requested for your assistance and presented the following information:
1. Sales budget for the five months from June 2011 to October 2011 is as follows
2. Finished goods at the end of the month are to be maintained at 25% of sales estimate for the
following month
3. 2,700 units of finished goods were available at the beginning of june 201
4. There is no closing work in progress (WIP) in any month
5. Each unit requires 5 kilograms of material 'Q and 4 kilograms of material 'P
6. Materials at the end of every month are to be maintained at half of the requirements for the
following month
Required:
i) Production budget for the month of June, August and September 2011
ii) Material 'P' usage budget for the month of June, July and August 2011
iii) Material 'Q' usage budget for the month of June and August 2011
Date posted: February 25, 2019. Answers (1)
- Describe the following terminologies in relation to preparations of a budget
i) Budget period
ii) Budget committee
iii) Budget manual(Solved)
Describe the following terminologies in relation to preparations of a budget
i) Budget period
ii) Budget committee
iii) Budget manual
Date posted: February 25, 2019. Answers (1)
- Bright Retailers Ltd. operates a budgetary control system. The following is the company's profit
forecast for the six months period ending 31 March 2012:(Solved)
Bright Retailers Ltd. operates a budgetary control system. The following is the company's profit
forecast for the six months period ending 31 March 2012:
Additional information:
1. 25%, of the sales are on cash basis. The balance is receivable three months after the month of
sale.
2. A generator worth Sh.600,000 was procured in September 2011. The supplier would install and
test the generator for three months whereas the payment will be made in January 2012.
3. Payment for raw materials is made to suppliers two months after delivery.
4. A dividend of Sh.900,000 will be paid in December 2011.
5. Rent for three months is payable in advance on the first day of each quarter.
6. Advertising expenses are paid three months in arrears.
7. 75% of the wages are paid in the month they are incurred with the balance being paid in the
following month.
8. The company's cost accountant estimates the closing cash balance for the quarter ending
December 2011 to be Sh.1 million.
Required:
A cash budget for the quarter ending 31 March 2012
Date posted: February 25, 2019. Answers (1)
- Explain five factors to consider when preparing a sales forecast for a cash budget.(Solved)
Explain five factors to consider when preparing a sales forecast for a cash budget.
Date posted: February 22, 2019. Answers (1)
- Distinguish between the following sets of terms:
ii) Fixed budget and flexible budget.(Solved)
Distinguish between the following sets of terms:
ii) Fixed budget and flexible budget.
Date posted: February 22, 2019. Answers (1)
- Kilim Ltd manufactures and sells a single product. The financial year of the company ends on 31
December every year. The following data have been collected...(Solved)
Kilim Ltd manufactures and sells a single product. The financial year of the company ends on 31
December every year. The following data have been collected for use in preparing the company's
quarterly budgets for the financial year ending 31 December 2013.
4. At the end of each quarter, closing stocks of finished goods are expected to be 10% of the
next quarter's sales requirement.
5. The closing stock of raw materials is expected to be higher than the opening stock by 10%.
6. Sales for the quarter ending 31 March 2011 A ate expected to be 36,000 units.
7. As from 1 July 2013, the selling price per unit is expected to increase by 10% from the
current price of Sh 600.
Required;-
i) Sales budget in value for each quarter.
ii) Production budget for each quarter.
iii) Material usage budget in units for each quarter
iv) Materials purchase budget for the year in units and value.
Date posted: February 22, 2019. Answers (1)
- Outline three differences between budgets and standards.(Solved)
Outline three differences between budgets and standards.
Date posted: February 22, 2019. Answers (1)
- Kazuri Furniture manufactures a single product branded 'sofa'. The following were the budgeted
costs at different levels of output for the year ended 31 December 2013:(Solved)
Kazuri Furniture manufactures a single product branded 'sofa'. The following were the budgeted
costs at different levels of output for the year ended 31 December 2013:
Date posted: February 22, 2019. Answers (1)
- Foper Ltd. currently operates a 'top-down' budgeting system where senior managers impose
budgets on departmental managers.
The company is now considering allowing departmental managers to participate in...(Solved)
Foper Ltd. currently operates a 'top-down' budgeting system where senior managers impose
budgets on departmental managers.
The company is now considering allowing departmental managers to participate in the setting of
their own budgets.
Required:
Argue the case for and against the participation of departmental managers in the preparation of their
budgets.
Date posted: February 22, 2019. Answers (1)
- Outline three advantages of flexible budgets over static budgets as tools for planning and
control.(Solved)
Outline three advantages of flexible budgets over static budgets as tools for planning and
control.
Date posted: February 22, 2019. Answers (1)