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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
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 )

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Problem 2 flexible and static budgets

  • 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 )