1. Handout 2 MA Problem 1
Flexible and static budgets
Problem 1:
The monthly budgets for manufacturing overheads of concerns are as follows.
Capacity budgeted production (units)
60%
100%
600
1000
Rs.
Rs.
Wages
1200
2000
Consumable stores
900
1500
Maintenance
1100
1500
Power and Fuel
1600
2000
Depreciation
4000
4000
Insurance
1000
1000
Required:
I.
Indicate which of items are fixed, variable and semi variable.
II.
Prepare a budget for 80% capacity level.
Solution:
Capacity output (units)
60%
100%
V.C
F.C
M.C
80%
600
1000
800
Rs.
Rs.
Rs.
Wages
1200
2000
2
1600
Consumable stores
900
1500
1.5
1200
Maintenance
1100
1500
1
500
1300
Power and Fuel
1600
2000
1
1000
1800
Depreciation
4000
4000
4000
4000
Insurance
1000
1000
1000
1000
10,900/=
High and low cost method
Maintenance
V.C
=
High cost – Low cost
High activity – Low activity
V.C
=
1500
–
1100
1000
–
600
V.C
=
1 per Unit
………………………………………………………………………………………………………………………………………..
F.C
=
High cost - ( high activity X V.C per unit)
F.C
=
1500 - (1000 X 1)
F.C
=
500
Power and Fuel
V.C
=
High cost – Low cost

2. High activity – Low activity
V.C
=
2000
–
1600
1000
–
600
V.C
=
1 per Unit
……………………………………………………………………………………………………………………………………….
F.C
=
High cost - ( high activity X V.C per unit)
F.C
=
2000 - (1000 X 1)
F.C
=
1000
For 80%
Maintenance
T.C
=
F.C
+
V.C
T.V
=
500 +
( 1 X 800 )
T.V
=
1300
Power and Fuel
T.C
=
F.C
+
V.C
T.V
=
1000 +
( 1 X 800 )
T.V
=
1800