Page 166 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Unit 7: Budgeting: Tool for Management Control

Notes

Task The profit budget for the Crocker Company for January 2007 was as follows:

Sales ` 498
Variable cost of sales 278
Sales 2500
Standard cost of sales 1620
Gross Profit 880
Selling expense 250
Research & Development expense 300
Administrative expense 120
Total expense 670
Net profit before taxes 210

The product information used in developing the budget was as follows:
E F G H
Sales – units (000) 1000 2000 3000 4000
Price per unit ` 0.15 ` 0.20 ` 0.25 ` 0.30
Standard cost per unit
Material 0.04 0.05 0.06 0.08
Direct labour 0.02 0.02 0.03 0.04
Variable overhead 0.02 0.03 0.03 0.05
Total variable cost 0.08 0.10 0.12 0.17
Fixed overhead (` 000) 20 60 60 160
Total standard cost 0.10 0.13 0.14 0.21
The actual revenues and costs for January 2007 were as follows:

` (000)
Sales 2160
Standard cost of sales 1420
Net standard cost of variances 160
Actual cost of sales 1580
Gross profit 580
Selling expense 290
Research & Development expense 250
Administrative expenses 110
Total expense 650
Net Loss ` (70)
Operating statistics for January 2007 were as follows:

E F G H
Sales (units) 1000 1000 4000 3000
Sales price ` 0.13 ` 0.22 ` 0.22 ` 0.31
Production 1000 1000 2000 2000
Actual manufacturing costs (000)
Material 360
Labour 200
Overhead 530
Prepare an analysis of variance between actual profits and budgeted profits for
January 2007.

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