Question: Edinburgh Energy Services (EES) provides electrical plug testing services for large corporate clients. In any month, the EES qualified electricians are budgeted to test 40,000

Edinburgh Energy Services (EES) provides
Edinburgh Energy Services (EES) provides electrical plug testing services for large corporate clients. In any month, the EES qualified electricians are budgeted to test 40,000 units spread evenly over the month. Each unit test is expected to take two hours of an electrician's time. The company uses a flexed budget system to report its actual results against budget in order to identify variances and take corrective action where and when appropriate. EES's budgeted charge to customers for each unit tested is 46 and it budgets to pay its electrician testers 15 per hour. Each test uses 5 of materials (fuses, wire and screws). All other costs of EES are fixed. For the month of May, EES's actual figures for its sales revenue and electrician labour costs were as follows: Actual units tested: 38,500 units at an average of 43 each Actual electrician labour cost: 78,000 hours at 14 per hour Required: 1. What is the sales volume variance in ? (Show clearly all workings.) 2. What is the labour efficiency variance in ? (Show clearly all workings.) 3. Month to month, EES often incurs material price and material efficiency variances, both favourable and unfavourable. If there was a scarcity of fuses, wires and screws that drove up costs, what type of variance would that likely lead to? 4. 'A flexed budget is used for control purposes and a fixed budget is used for planning purposes'. Explain briefly the meaning of this statement. 5. In a stable organisation, where costs are not expected to vary significantly, state whether an 'incremental' or a 'zero-based' method of budgeting would be more suitable and explain why

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!