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Managerial Accounting - Flexible Budget

   

Added on  2019-10-30

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MANAGERIAL ACCOUNTING1MANAGERIAL ACCOUNTING

MANAGERIAL ACCOUNTING2Answer 1:Part a:The flexible budgeting helps in assessing the performance of a product in a most constructiveway. This report compares in the actual expenses that have been incurred with the expensesthat should have been incurred. This is as per the given level of activity. These expensesshould have been incurred keeping in mind the actual level of the activity which can only beobtained from the flexible budget (UNF, 2017).Flexible budgeting lays down the costs that would be incurred if any specific level of activityor specific number of units are produced by the company. This budget helps in ascertainingthe costs for the product. It is used in performance valuation since it concerns with the pastcosts that have been incurred and so keeping in mind the rate of inflation for the current year,the costs that should have been incurred are computed. And if the costs actually incurred aremore than the flexible budged costs, then the performance of that product is bad and if thecosts incurred for the manufacture of the product is less, then the performance of that productis bad. The performance of the managers are also evaluated using this sort of budgeting.Similarly, if more costs are incurred, bad performance of a manger and if less, goodperformance of the manager.Part b:The following are the budgets that needs to be prepared:Direct labour budget which is the budget which lays down the expense that would beincurred towards the direct labour hours.Direct material budget since this lays down the cash that would be paid for thematerials that would be supplied in by the suppliers.

MANAGERIAL ACCOUNTING3Overheads such as utilities, rent etc since that would include the amounts that wouldbe incurred towards the expenses.Since all of the above entail payment of cash, these have to be prepared before the cashbudget is prepared (Accounting explained, 2017).Part c:An operating cycle is the amount of the time that the company consumers from acquiring theinventory to selling off of the inventory and receiving cash from its customers in exchange ofthe goods that are sold to them. This cycle is important to know since a higher operatingcycle would represent blockage of the funds in the business.Cash cycle deals with cash and operational cycle deals with the operations, hence they arevery different (Small business chron, 2017).Working capital ratio is calculated which is the amount of capital which is invested in thebusiness. For the purpose of calculating the same, the current assets are divided by theamount of the current liabilities.The data we required for the above is the amount of the current assets and the amount of thecurrent liabilities held by the company.Part d:The statement is not true. In fact, the government organisations are more responsible towardsthe society since they are formed by the money that is paid by the citizens of the company.The maintenance of adequate and proper books of accounting is of an utmost importance forthe government organisations too. In order to check their compliance and truthfulness andfairness, these companies are regularly audited by the government and are required tomaintain some specific records.

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