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ACCA Applied Knowledge · Management Accounting · Budget preparation

A company uses a rolling budget of four quarters, updated each quarter. The original annual budget for quarters 1 to 4 had direct labour of 20,000 hours per quarter. At the end of quarter 1, actual hours were 21,500 and management revised expected hours for quarters 2 to 4 to 22,000 per quarter, adding a new quarter 5 at 22,000 hours. What total labour hours appear in the updated rolling budget for the four quarters 2 to 5?

The updated rolling budget contains 88,000 hours. It covers quarters 2 to 5, each at the revised 22,000 hours, giving four times 22,000. Quarter 1 actuals drop out of the budget period and the original 20,000-hour figures are superseded.

  1. A80,000
  2. B86,000
  3. C88,000Correct
  4. D87,500

Explanation

The rolling budget covers quarters 2 to 5, each at the revised 22,000 hours: 4 x 22,000 = 88,000. Actual quarter 1 hours are excluded, and the 80,000 option uses the original budget.

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