Page 158 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Unit 8: Budgetary Control

Repairs and maintenance Notes
80% fixed and 20% variable ----------------- 4,000 ----------------

Fixed Overheads
Depreciation ----------------- 22,000 -----------------
Insurance ----------------- 6,000 -----------------
Salaries ----------------- 20,000 -----------------
Total overheads ----------------- 1,24,000 -----------------

Flexible Budget for the Period
Particulars 70% capacity 80% capacity 90% capacity
Variable overheads
Indirect labour 21,000 24,000 27,000
Stores including spares 7,000 8,000 9,000
Semi-variable Expenses - Power* Fixed 30%
**Variable 70% 8,000 8,000 8,000
28,000 32,000 36,000
Repairs and maintenance
***Fixed 80% 3,200 3,200 3,200
****Variable 20% 700 800 900
Fixed Overheads
Depreciation 22,000 22,000 22,000
Insurance 6,000 6,000 6,000
Salaries 20,000 20,000 20,000
Total Overheads 1,15,900 1,24,000 1,32,100

Master Budget

Immediately after the completion of functional or departmental level budgets, the major
responsibility of the budget officer is to consolidate the various budgets together, which is

detailed report of all operations of the firm for a defi nite period.

Self Assessment

State whether the following statements are true or false:
12. Fixed budget is a budget known as constant budget.
13. Fixed budget is most useful tool of analysis in studying the sales at when the circumstances
are not warranting to predict.
14. Flexible budget is prepared for any level of production as an estimate of statement of all
expenses

8.5 Zero-base Budgeting (ZBB)

Zero-base budgeting is one of the renowned managerial tool, developed in the year 1962 in America
by the Former President Jimmy Carter. The name suggests, it is commencing from the scratch,
which never incorporates the methodology of the other types of budgeting in determining the
estimates. The Zero base budgeting considers the current year as a new year for the preparation
of the budget but the yester period is not considered for consideration. The future activities are
forecasted through the zero base budgeting in accordance with the future activities.

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