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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
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

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  • 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