Step fixed costs
Step fixed costs that are fixed within certain range of activity but change outside of that range. Eg. Rent could be fixed up to a certain level of production.
List and explain two limitations/assumptions of marginal costing
- There is an outside limit to the numbers the business can produce the numbers depend on @ the amount of units the business can sell.
- marginal costing does not take into the fact raw materials may be difficult to procure or that you may not have the skill set to produce large numbers
Cash budget and describe two of its advantages
Is a forecast of cash flow and cash outflow over a period.
Advs. 1. Helps to give advance knowledge so that overdraft can be arranged if shortfall occurs. 2. Helps to predict future surpluses to that short term investment can be made.
Capital budget
Money you expected on fixed assets deals with any planned expenditure eg. Fixed assets such as premises sums are quite large. They are permanent and not for sale.
State two other items that could also be considered to be the principal budget factor.
Is a factor that limits the size of the sales. The most important factor is demand but less important might be available of raw materials, availability of skilled labour, size of production.
When is the use of this ratio essential
When you want to find out what the profit will be if you change the variables.
For what purpose is the contribution sales ratio regularly used?
Calculate break even point.
What is meant by a special purpose profit and loss account
Non profit organisations use this for activities that are carned out make a profit eg. Club lottery!
What is an adverse variance? State why adverse variances may arise in direct material cost.
When actual spending is greater than budgeted spending this is called an adverse variances. 1. Scarce goods due to strike in the supplies plant or a political situation developing. 2. The price being charged has risen or the budgeted amount for materials needed was wrong.
Master budget
Summary of all the other budgets.
List the components of a master budget for a manufacturing firm.
Budgeted manufacturing account
Budgeted trading account and profit and loss
Budgeted balance sheet .
State and explain two limitations of a receipts and payments account
- It shows money received from the bar and also bar payments but does not show bar profit.
- it shows us actual interest received but does not tells us the total interest for the year.
- It takes no account of opening and closing expense due.
