Describe the concept of budgetary control through the use ofstatic and flexible budgets. Describe how responsibility accountingis an essential part of an effective system of budgetarycontrol.

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Nestor RutherfordLv2

2 May 2019

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A The key characteristics of an effective budget system. B Thesteps to prepare a master budget. C How a flexible budget willassist management in evaluating performance at the end of anaccounting period. D)Demonstrates how budgeting assists Fordâsmanagement in making critical long-term and short-term decisions.E) Discusses the impact of Fordâs decisions to eliminate cars.

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Discuss what the above statement means and whether you agreewith it. Describe how an organisation that you have experience of,or have researched, has benefitted from just-in-time (JIT)techniques and with special reference to inventory control. Alsodiscuss whether the potential benefitsâand drawbacksâof such JITtechniques are limited to large manufacturing businesses or whetherthey have wider applications for other organisations.

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Consider the following information from Grantham Company,then see the instructions that
follow.

Grantham Company manufactures dog whistles. The followinginformation is available from
the budgetary control system for 2016, and was used to createthe master budget. Grantham
applies overhead using an activity index of direct laborhours.

	Variable Costs	Rate per direct labor hour
	Indirect labor	$0.52
	Indirect materials	0.36
	Factory utilities	0.88
	Factory repairs	0.48

	Fixed Costs	Amount per year
	Depreciation	$25,300
	Insurance	9,300
	Property taxes	5,800
	Supervision	61,500

The master overhead budget was prepared with the expectationthat 462,000 direct labor
hours would be worked during the year. In August, 39,500 directlabor hours were worked.
At that level of activity, actual costs were as shown below:

	Variable Costs
	Indirect labor	$0.54	per labor hour
	Indirect materials	0.34	per labor hour
	Factory utilities	0.91	per labor hour
	Factory repairs	0.53	per labor hour

	Fixed Costs
	Depreciation	$2,108
	Insurance	825
	Property taxes	500
	Supervision	5,250

Instructions:
Prepare a monthly manufacturing overhead flexible budget,assuming production levels
ranging from 30,000 to 45,000 direct labor hours, in incrementsof 5,000.

Prepare a budget report for August comparing actual results tothe flexible budget. Explain
whether costs were successfully controlled and how you cantell.

THIS ASSIGNMENT MUST BE COMPLETED IN EXCEL. You should developan efficient and
customizable production cost report, using formulas wheneverpossible instead of keyed in
values. No numeric values except the ones shown above shouldneed to be keyed in.