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Today we are going to come up with new task, that is about ”Several years ago, Westmont Corporation developed a comprehensive budgeting system for planning and control purposes. While…“. We have found the solution to this question, along with interesting information related to it, thanks to its novelty and interest. This will help you to develop a more research-oriented mindset, and make it easier for you to answer these types of questions. This is where we will focus to gain this useful and new knowledge!
Question: “Several years ago, Westmont Corporation developed a comprehensive budgeting system for planning and control purposes. While…”
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Answer: “Several years ago, Westmont Corporation developed a comprehensive budgeting system for planning and control purposes. While…”
- Cost reports are ineffective since budgeted costs at one level of activity are compared to actual costs at another level of activity. Cost reports show whether fixed costs are controlled and do not show whether variable costs are controlled.
- Flexible budget performance report should be used
3) Flexible Budget Performance Report
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Actual result | Spending varience | Flexible Budget | Activity | Variance | Planning Budget | |
Machine hours | 35.000 | 0 | 35.000 | 40.000 | ||
Supplies | 29.700 | 1.700 U | 28.000 | 4.000 | F | 32.000 |
Scrap | 19.500 | 2.000 U | 17.500 | 2.500 | F | 20.000 |
Indirect Materials | 51.800 | 2.800 U | 49.000 | 7.000 | F | 56.000 |
Wages and Salaries | 79.200 | 800 F | 80.000 | 0 | N | 80.000 |
Equipment Depreciation | 60.000 | 0 U | 60.000 | 0 | N | 60.000 |
Total | 240.000 | 5.700 U | 234.500 | 13.500 | F | 248.000 |
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(here wages & salaires and Equipment depreciation are fixed costs) |
Flexible budget = planning budget cost/40000*35000
4. Costs were not well controlled
Relevant knowledge
A planning budget is created at the beginning of each period to reflect the planned activity level. At the end of each period, a flexible budget is created at the actual activity level. The flexible budget performance report displays the activity variance between the planned and flexible budgets as well as the revenue and expenditure variance between the actual and flexible results.
Conclusion
This is how you solve this type of task “Several years ago, Westmont Corporation developed a comprehensive budgeting system for planning and control purposes. While…”. Please leave a message below if you have any questions or comments.
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