These activities will reinforce your understanding of how cost v. benefit works and should be completed after reading up to pages 21-22 of Chapter 1.
Cost v. Benefit: Activity 1
You are checking the monthly accounts for your organization, a steel frame manufacturer. The firm’s policy is to investigate variances between actual results and budgeted results where the benefit of investigating is greater than the cost of conducting the investigation. You notice that administration expenses have cost £325 and repairs and maintenance £600 more than they were budgeted to for the current month. Investigation of cost overruns costs £75 per hour of employee time. Cost overruns on average require 5 hours of employee time to investigate. Which of the two cost overruns should you investigate?
Cost v. Benefit: Activity 2
You are in your exam. Time is running out. You have 20 minutes left. You still have one whole question to attempt, but you are keen to finish off your current essay as it deals with your favourite aspect of the subject. Your current essay already runs to 3 pages and you are quite happy that you have sufficient points to score 16 marks out of the 25 available. The final question carries 20 marks and you reckon that in the remaining 20 minutes you could produce enough discussion to gain 60% of the 20 marks. Should you carry on with your current essay or move on to the final question?
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