Product A Product B Total

Machine hours 1000 3000 4000

Number of batches 45 15 60

Manufacturing Cost 125000

22500

Activity Rate

Machine hours 0.25 0.75

Number of batches 0.75 0.25

Inspection Cost assig 22500 7500

There is no product C
Particular Budgeted Variable Cost /Unit Budgeted Fixed Cost Budgeted
Production 5,000
Costs
Direct Material 25 - 125,000
Direct Labour 15 - 75,000
Variable production Overheads 5 - 25,000
Fixed production overheads (Rs.150,000) 150,000 75,000
Selling expenses (10% fixed) 14 7,500 75,000
Administrative expenses fixed: Rs. 50,000) 50,000 25,000
Distribution expenses (20% fixed) 4 5,000 25,000
Total cost 425,000

It is assumed that the fixed expenses are fixed at actual, however, the fixed cost for the budget are less
Actual Flexible Variance Analysis
8,000 8,000 -

200,000 200,000 -
120,000 120,000 -
40,000 40,000 -
150,000 120,000 -30,000 Unfavourable
115,500 115,500 -
50,000 40,000 -10,000 Unfavourable
37,000 37,000 -
712,500 672,500 -40,000 Unfavourable
Particulars Rate/Unit Qty Amount Question

Sale 12

Variable Costs
Direct Wages 4.5
Fruits and Vegetables 4
Total Variable Costs 8.5

Contribution 3.5

Fixed Costs
Rent of delivery van 4500
Rent of premises 10500
Advertising 2500
Total Fixed Costs 17,500

Break Even Point 5,000 A

If Profit of Rs. 17,500 needs to be earned 17500
Then Sales required 10,000 B
Particular Budgeted Variable Cost /Unit Budgeted Fixed Cost
Units Production and Sales
Sales
Sale Price
Costs
Direct material (Rs.) 1.00 -
Direct wages (Rs.) 1.50 -
Variable overheads (Rs.) 0.50 -
Fixed overhead (Rs.) 40,000
Total cost
Master Budgeted Actual Variance (Given) Flexible Budget (A) Variance (Flexible vs Actual) (B)
80,000 72,000 78,400 6,400
320,000 280,000 40,000 (A)
4.00 3.89

80,000 73,600 6,400 (F) 78,400 4,800

120,000 104,800 15,200 (F) 117,600 12,800
40,000 37,600 2,400 (F) 39,200 1,600
40,000 39,200 800 (F) 40,000 800
280,000 255,200 275,200 20,000
Analysis
Favourable

Unfavourable
Unfavourable
Unfavourable
Unfavourable
Unfavourable
 500,000.00
Manufacturing overhead
Assembling units Number of units 0.50
Processing orders Number of orders 0.35
Supporting customers Number of customers 0.05
Other Not applicable 0.10

A Assembling units
Manufacturing overhead 250,000.00
Selling and administrative overhead 30,000.00

B Activity Cost Pools Manufacturing overhead

Cost per Unit
Assembling units 250.00
Processing orders 175.00
Supporting customers 25.00
Other 50.00
Total 500.00

Cost per Order

Assembling units 1,000.00
Processing orders 700.00
Supporting customers 100.00
Other 200.00
Total 2,000.00

Cost per Customer

Assembling units 2,500.00
Processing orders 1,750.00
Supporting customers 250.00
Other 500.00
Total 5,000.00

C Office Mart No. of orders 4.00 We assume an average of 20 quantity per orde
Office Mart qty. of orders 80.00

Activity Cost Pools Manufacturing overhead

Cost as a No. of units as activity measure
Assembling units 20,000.00
Processing orders 14,000.00
Supporting customers 2,000.00
Other 4,000.00
Total 40,000.00

Cost as a No. of orders as activity measure

Assembling units 4,000.00
Processing orders 2,800.00
Supporting customers 400.00
Other 800.00
Total 8,000.00
Cost as a No. of customers as activity measure
Assembling units 2,500.00
Processing orders 1,750.00
Supporting customers 250.00
Other 500.00
Total 5,000.00
 300,000.00
Selling and administrative overhead Total
0.10 1,000.00
0.45 250.00 Assuming, Avg. units per order = 4
0.25 100.00 Assuming, Avg. units per customer = 10
0.20 -

Processing orders Supporting customers Other

175,000.00 25,000.00 50,000.00
135,000.00 75,000.00 60,000.00

Selling and administrative overhead

30.00
135.00
75.00
60.00
300.00

120.00
540.00
300.00
240.00
1,200.00

300.00
1,350.00
750.00
600.00
3,000.00

verage of 20 quantity per order

Selling and administrative overhead

2,400.00
10,800.00
6,000.00
4,800.00
24,000.00

480.00
2,160.00
1,200.00
960.00
4,800.00
 300.00
1,350.00
750.00
600.00
3,000.00
 Variable Costs 20.00 per unit

a Annual Break even Point = Total Fixed cost/contribution

15,000.00 units

b If sales = 20,000.00 hats

Total Cost 550,000.00
Total Revenue 600,000.00
Net Profit 50,000.00

c If sales = 25,000.00 hats

Margin of Safety -units 10,000.00
Margin of Safety -revenue 300,000.00
Margin of Safety Ratio-units 0.67
Margin of Safety Ratio-revenue 0.67

d New Variable Cost = 15.50

New Fixed Cost= 232,000.00
New Break Even Point 16,000.00 units
If 20000 units are sold with new salary plan
New Revenue 600,000.00
New Cost 542,000.00
Net Income/Profit 58,000.00
Fixed Cost 150,000.00 Sales Price 30.00 per unit