Budgetary Control Principles and Practices, Financial Data Recording and Storage Procedure, Relationship between Variance Analysis and Costing System Integrity

Case study 4.2
Task 1
Management could gather cost data by identification and establishment of the system for
gathering operating data. This data can be recorded by using a systematically coded data. Such
data should be classified appropriately as per policies of the organization and must be accurate
and reliable.
Budget preparer could get cost data for the budget from all sections of the organization by asking
for cost information advice. In addition to gathering, cost data budget preparer should use the
proper structure for preparation of budgets.
Task 2
a. Revenue reduction due to fundraiser is the major contributor to the dollar variance. It is
occurred because of postponement of Gala night even 2002.
Working note
Budget Actual Variance
Revenue
Sales $ 10,000.00 $ 9,000.00 $ 1,000.00 10.00%
Dues $ 1,000.00 $ 800.00 $ 200.00 20.00%
Fund raiser $ 4,000.00 $ 2,000.00 $ 2,000.00 50.00%
total revenue $ 15,000.00 $ 11,800.00 $ 3,200.00 21.33%
Expenses
Cost of goods $ 4,000.00 $ 3,500.00 $ 500.00 12.50%
Pay roll $ 2,000.00 $ 2,100.00 $ 100.00 5.00%
Employees FICA $ 150.00 $ 160.00 $ 10.00 6.67%
Supplies $ 1,000.00 $ 940.00 $ 60.00 6.00%
Miscellaneous
expenses $ 100.00 $ 125.00 $ 25.00 25.00%
Total expenses $ 7,250.00 $ 6,825.00 $ 425.00 5.86%
Net income $ 7,750.00 $ 4,975.00 $ 2,775.00 35.81%
b. Calculation of percentage of the cost of supplies
Budget Actual
Supplies $ 1,000.00 $ 940.00
Total expenses $ 7,250.00 $ 6,825.00
Percentage of cost 13.79% 13.77%
c. Net income shows an unfavorable variance of 35.81%

Working note
Budget Actual Variance
Revenue $ 15,000.00 $ 11,800.00 $ 3,200.00 21.33%
Expenses $ 7,250.00 $ 6,825.00 $ 425.00 5.86%
Net income $ 7,750.00 $ 4,975.00 $ 2,775.00 35.81%
d. Actual payroll was higher because organization’s employees worked overtime hours for
cleaning the damages made by the unexpected typhoon.
e. Budget report
Sales Noncontrollable variance
Sales variance is unfavorable because of the closure of club during one week due
to the unexpected typhoon.
Dues Controllable variance
Dues are showing 20% unfavorable variance due to PCS of 15 members.
Fundraiser Noncontrollable variance
The fundraiser is showing 50% unfavorable variance. It is occurred because of
postponement of Gala night even 2002.
Cost of
goods sold
Noncontrollable variance
Cost of goods is showing 12.5% favorable variance. This is the reflection of ale
reduction. The sale reduced due to the closure of club during one week due to
unexpected typhoon
Task 3
Factory ledger accounts
Direct material control
Particulars Debit Credit
Balanc
e
Opening balance 5000 5000
Purchases on account 19000 24000
Cash purchases 2000 26000
Work in progress control 18000 8000
Factory overhead control 2000 6000
Direct labor control
Particulars Debit Credit
Balanc
e
Cash 37143 37143
Work in progress control 27143 10000
Factor overhead control 10000 0

Factory overhead control
Particulars Debit Credit
Balanc
e
Direct material control 2000 2000
Direct labor control 10000 12000
Depreciation 3600 15600
Insurance 600 16200
Rent 2800 19000
Work in progress control 19000 0
Work in progress control
Particulars Debit Credit
Balanc
e
Opening balance 15200 15200
Direct material control 18000 33200
Direct labor control 27143 60343
Factory overhead control 19000 79343
Finished goods control 62000 17343
Abnormal loss 6143 11200
Finished goods control
Particulars Debit Credit
Balanc
e
Opening balance 15000 15000
Work in progress control 62000 77000
Cost of goods sold 68000 9000
Manufacturing statement
Direct materials used 18000
Direct manufacturing labor 27143
Manufacturing overhead costs:
Indirect manufacturing labor 10000
Indirect material 2000
Depreciation - plant 3600
Factory insurance 600
Factory rent 2800
Total Manufacturing overhead costs 19000
Manufacturing costs incurring during the month 64143
Beginning work-in-progress inventory 15200

Total manufacturing costs to account for 79343
Ending work-in-progress inventory 11200
Cost of goods manufactured 68143
Treading statement
Sales revenue 110000
Cost of goods sold:
Beginning finished goods inventory 15000
Cost of goods manufactured 68143
Goods available for sale 83143
Ending finished goods inventory 9000
Cost of goods sold 74143
Gross income 35857
Task 4
Inventory ledger card
Date Particulars In Out Balance
Unit
s
Rat
e cost
Unit
s
Rat
e cost
Unit
s
Rat
e cost
01-Jun Balance 240 6
144
0
05-Jun Purchase 160 5.5 880 240 6
144
0
160 5.5 880
10-Jun Issue Job 60 40 6 240 200 6
120
0
160 5.5 880
15-Jun Issue Job 61 200 6
120
0 140 5.5 770
20 5.5 110
20-Jun Purchase 260 6
156
0 140 5.5 770
260 6
156
0
22-Jun Issue Job 62 100 5.5 550 40 5.5 220
260 6
156
0