Scion Corp. manufactures earth- moving equipment. Department A303 produces a number of small metal parts for the equipment, including specialized screw products, rods, frame fittings, and some engine parts. Scion uses flexible budgeting. The budget for each line item is based on an estimate of the fixed costs and variable costs per unit of volume for that item. The volume measure chosen for each line item is the one with the greatest cause- and- effect relation to the item. For example, the volume measure for utilities is machine hours, whereas the volume measure for supervision is direct labor hours of hourly employees.

Discuss the advantages and disadvantages of the two alternative schemes (adjusting the budget versus adjusting theactual).

  • CreatedDecember 15, 2014
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