It is most sensible to start with the sales budget and develop the other budget from there

1) Using the information available to you in Exhibit 6 and Exhibit 7; provide detailed computationsto calculate the following variances for the year ended December 31,2011,identify the person/department toget additional information from regarding the variances and lastlysuggest one plausible explanation for each variance.{No Page Limit}

a. Detailed Direct Materials Price and Quantity Variances. (2 Marks) b. Detailed Direct Labour Rate and Efficiency Variances. (2 Marks) c. Detailed Variable Overhead Spending and Efficiency Variances. (3 Marks)

2) Using the information available to you; providedetailed computationsto prepare the following budgets for each of the remaining three quarters of the year 2012. {No Page Limit} a. Detailed Production Budget. (1.5 Mark) b. Detailed Budgeted Direct Materials Purchases. (2.5 Marks) c. Detailed Budgeted Variable Overhead including the Indirect Materials Purchases. (2.5 Marks) d. Detailed Budgeted Direct Labour. (1.5 Marks) e. Detailed Cash Budget with appropriate supporting schedules. (4 Marks) f.Do you agree with Bill’s suggestions to update thevariable production cost standards of 2011 before preparing 2012? Do you think that Bill is trying to manipulate the budgets of 2012 to make his production department appear to be more productive and avoid any unfavorable variances in the future? Explain why would Bill make such suggestions? (1 Mark)


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