SEU Ismail Company Worksheet

User Generated

Fnensnunq11

Business Finance

SEU

Description

Q 3 In a recent accounting period, Ismail Company experienced a SAR30,000 unfavorable variance for variable production costs. Explain the meaning of an unfavorable variance. Suggest two possible (1 mark)

Answer

Meaning of unfavorable variance: If actual variable production cost is greater than standard variable production cost then the difference is unfavorable.

Possible Reason:

Rate of the actual variable overhead increased due to increased prices of indirect materials.

Excess indirect material used. Wastage of indirect materials.

Q 4 How are budgets related to organizational strategies? (1 mark)

Answer

Budget is not just an exercise that the CFO gives to the managers of the company to provide busy work to those already very busy. A budget is a comprehensive financial plan for achieving the financial and operational goals of an organization. Used correctly, a budget is the map of the company’s strategic plan. In creating the budget, the company is developing its objectives for the acquisition and use of its resources. Once in place, it becomes a valuable benchmark to determine how well the steps taken by management are ensuring objectives are attained.

There are many benefits derived from budgeting. It formalizes the coordination of activities between departments while aligning these activities to the big picture – the company’s strategic plan. It provides the assignment of decision-making responsibilities and enhances management’s responsibility. With a solid plan in place, all decision makers are working towards the same goal. In addition, the budget improves performance evaluations – providing a common base for discussion on how well the manager met his goals and providing a talking point concerning why actual results veered from the original budget. It encourages all areas within the business to become more efficient, which rolls up to a greater efficiency company-wide

User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

Attached.

Q 3 In a recent accounting period, Ismail Company experienced a SAR30,000
unfavorable variance for variable production costs. Explain the meaning of an
unfavorable variance. Suggest two possible (1 mark)
An unfavourable variance in this case occurs when the actual costs of production are
greater than the budgeted costs that were set according to standards. Such a variance
could arise due to spe...


Anonymous
Really useful study material!

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Similar Content

Related Tags