MANAGEMENT ACCOUNTING ASSIGNMENT

Management Accounting Assignment - Flexible Budgeting

Management Accounting Assignment - Flexible Budgeting

Budgeting

The budget is a financial plan of the designated time horizon, which serve as reference measures occur in the future (Pilkington & Crowther, 2007, pp. 29 - 30). The budget plays an important role in business management. It is a tool for analyzing and monitoring the implementation of set objectives. Companies should note that in the course of its implementation on the total deviation of the influence factors related to the size of business and the factors associated with effectiveness (Jordan & Hackbart, 2005, pp. 471 - 487). In order to correctly interpret deviations, it is necessary so their separation, which will enable proper evaluation of the implementation of the budget. It may be, for example, that the company incurred higher production costs, but realize more than planned sales (Fay, Rhoads, & Rosenblatt, 1971, pp 120 - 131). Such a deviation should then be assessed positively. The above defect associated with the use of traditional budgets, we can eliminate, and in preparing the flexible budget (Mullen, 2006, pp. 79 - 88; Guilding, 2009, pp 74 - 79). Budgets are being developed for different levels of activity and can be adapted to circumstances arising at any time. These show the revenues, costs and expenses adjusted to the size of manufacturing or commercial operations (Fay, Rhoads, & Rosenblatt, 1971, pp 120 - 131).

Flexible budget is drawn up for different sizes, and thanks to the possibility of response to changes in economic conditions of its use can greatly facilitate the interpretation of the execution (Pilkington & Crowther, 2007, pp. 29 - 30). It is prepared for different levels of operation, providing information designed for different volumes of the critical variables, especially those that constitute a restriction or condition factor. Thus, the company will be able to take effective actions that will improve financial results. The problem of cost variation is present in every modern company (Mak, & Roush, 1996, pp. 141 - 146). The variability of costs is the main reason why a company decides to use a flexible budget. Each company can extract the breakdown of costs for fixed and variable. This division is a fundamental principle of the budget is flexible. Furthermore, flexible budgeting, also introduces the distinction between quasi-fixed costs. In this case, must be accurately separated into fixed and variable element (Medlik, & Ingram, pp 137 - 141; Harris, 1998, pp 27 - 34).

Required:

Room Division

Prepare a flexible budget for the hotel for the four months ended 30th September 2010 and record all flexible budget variances.

Calculate the room cleaning labour rate and efficiency variances.

Calculate the room amenity price and efficiency variances.

Calculate the selling price and sales volume variances.

Notable Points:

The Rooms Division budgeted to sell 10,800 room nights.

The actual room nights sold were 12,420.

Requirement 1: Flexible Budget

Flexible Budget for the 4 months period ended 30th September

 

 

BudgetedUnits

BudgetedSales

 

ActualUnits

ActualSales

Rooms Sold

108,00 Rooms

£ 1,080,000

124,20 Rooms

£ 1,179,900

Cost Item

BudgetedPer Unit

BudgetedUnits

BudgetedAmount

ActualPer Unit

ActualUnits

ActualAmount

Direct Labor

£ 14.0

5,400.0

£ 75,600

£ 15.0

5,630.4

£ 84,456

Room Amenities

£ ...