- 10 Marks
PSAF – May 2019 – L2 – Q3a – Public sector fiscal planning and budgeting
Prepare a flexible budget for 50% activity level and a variance analysis for the Ministry of Works and Housing.
Question
a) The Ministry of Works and Housing prepares its budget using activity volume as a base for control purposes. The Ministry’s normal level of activity is 70%. However, in 2018, the Ministry had a peculiar challenge to the extent that they operated at a 50% level of activity. Below is the budget for 2018.
| Level of activity | 60% | 70% | 80% |
|---|---|---|---|
| Income: | GH¢ | GH¢ | GH¢ |
| IGF | 337,500 | 345,300 | 353,100 |
| Expenses: | |||
| Compensation of Employees | 175,200 | 204,400 | 233,600 |
| Goods and services | 57,000 | 64,500 | 72,000 |
| Interest | 63,500 | 73,100 | 82,700 |
| Assets | 31,500 | 36,700 | 41,900 |
| Other Expenditure | 190,000 | 190,000 | 190,000 |
| Surplus/Deficit | (179,700) | (223,400) | (267,100) |
Actual Results for 2018:
| Description | GH¢ |
|---|---|
| IGF | 350,920 |
| Compensation of Employees | 129,500 |
| Goods and Services | 73,400 |
| Interest | 92,000 |
| Assets | 31,100 |
| Other Expenditure | 172,300 |
Required:
i) Prepare a flexible budget for 50% level of activity.
(7 marks)
ii) Prepare a Variance Analysis Statement for the operational year 2018.
(3 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Budgeting, Flexible Budget, Ministry of Works and Housing, Variance Analysis
- Level: Level 2
- Topic: Public sector fiscal planning and budgeting
- Series: MAY 2019
Report an error