Geography & History Notes | KCSE, NECTA, ZIMSEC & GCSE

  Traditional costing system uses arbitrary methods to allocate overheads to products. Generally, this method allocates overheads using a single overhead rate, also known as a blanket overhead rate or predetermined rate. For example making use of direct labour hours, Machine hours, Production units, floor space etc. Consider this example of Ms PriceCut clothing store. There are 3 departments, Women, Men and children. The floor space and floor labour hours is 800m2 and 15 000 hours for Women's department, 300m2 and 1500 hours for the men's department and 500m2 and 3500hours for the children's department. The company’s only overheads is $2,6 million of rent expenses. These overheads are allocated to the department using floor labour hours. Based on this information, the blanket overhead allocation rate is $130 per floor hour, that is $2,6 million/20 000hours The allocations to the departments will be: Women: 15 000 x $130 = R1 950 000 Men: 1 500 x $130 = R195 000 Children: 3 ...

  The policy of a business for a defined period is represented by the master budget, the details of which are given in a number of individual budgets called functional budgets. These functional budgets are broadly grouped as physical, cost and profit budgets. Physical Budgets Those budgets which contains information in terms of physical units about sales, production etc. for example, the number of sales, quantity of production, inventories and manpower budgets are physical budgets. Cost budgets Budgets which provides cost information in respect of manufacturing, selling, administration etc. for example, manufacturing cost, selling cost, administration cost and research and development cost budgets are cost budgets. Profit budgets Budgets which enables in the ascertainment of profit, for example, sales budget, profit and loss budget, etc. Types of Budget Fixed Budget. Flexible Budget. Master Budget. Functional Budget. Long Term Budget. Short Term Budget. Current Budget. Fixed Budget...

  Marginal costing is a technique of assigning the cost to the product in which only the variable costs are considered in calculating the cost of the product, while fixed costs are charged against the revenue of the period. The revenue arising from the excess of sales over variable costs is technically known as Contribution under Marginal Costing The following are the importance or usefulness of marginal costing Helps in determining the volume of production Marginal Costing helps in determining the level of output that is most profitable for a running concern. The production capacity, therefore, can be utilized to the maximum possible extent. It helps in determining the most profitable relationship between cost, price and volume in the business which helps the management in fixing the best-selling price for its products. Thus, maximization of profit can be achieved. Helps in selecting production lines The technique of Marginal Costing helps in determining the most profitable p...

  What is a Budget? A budget refers to an estimated statement. It is prepared by companies as well as the government. It is for the purpose of attaining some goal. Budget can be defined as a financial and/or quantitative statement prepared and approved prior to a defined period of time of the policy to be pursued during that period for the purpose of attaining a given objective. It may include income, expenditure, and employment of capital. It is often used for control purposes. What is Budgetary Control? It is a process in which a budget is set and the actual is compared with a budget to analyse variances. It means the establishment of budgets relating the responsibilities of executives to the prerequisite of policy and the continuous evaluation of actual with budgeted results either to secure by individual action the objective of that policy or to provide a base for its revision. Objectives of Budget Planning: A set of targets/goals is often essential to lead and focus on individ...