1. Problem 2:
The monthly budgets for manufacturing overheads of concerns are as follows.
Capacity budgeted production (units)
60%
1200
Rs.
2400
1800
2200
3200
8000
2000
100%
2000
Rs.
4000
3000
3000
4000
8000
2000
Wages
Consumable stores
Maintenance
Power and Fuel
Depreciation
Insurance
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
1200
2000
Rs.
Rs.
Wages
2400
4000
2
Consumable stores
1800
3000
1.5
Maintenance
2200
3000
1
1000
Power and Fuel
3200
4000
1
2000
Depreciation
8000
8000
8000
Insurance
2000
2000
2000
High and low cost method
Maintenance
V.C
=
High cost – Low cost
High activity – Low activity
V.C
=
3000
–
2200
2000
–
1200
V.C
=
1 per Unit
High cost
F.C
=
High cost - ( high activity X V.C per unit)
F.C
=
3000 - (2000 X 1)
F.C
=
1000
Power and Fuel
V.C
=
High cost – Low cost
High activity – Low activity
V.C
=
4000
–
3200
2000
–
1200
V.C
=
1 per Unit
80%
1600
Rs.
3200
2400
2600
3600
8000
2000

2. High cost
F.C
=
F.C
=
F.C
=
High cost - ( high activity X V.C per unit)
4000 - (2000 X 1)
2000
For 80%
Maintenance
T.C
=
F.C
T.V
=
1000
T.V
=
2600
Power and Fuel
T.C
=
F.C
T.V
=
2000
T.V
=
3600
+
+
V.C
( 1 X 1600 )
+
+
V.C
( 1 X 1600 )