Flexible Budget Examples( Chapter 18)
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Solution of Problem No. 18-2
Level of Activitie Particulars Direct Labor hours
80% 40,000
Variable Expenses: 1 Shop supplies (0.10 per direct labor hours) 2 Indirect labor (0.45 per direct labor hours) 3 Payrol taxes &Fringe benefit (W-1)
4,000 18,000 57,240
4 Power and Light (W-2) 5 Inspection (W-3) 6 Other semi variable expenses (W-4) TOTAL VARIABLE EXPENSES
1,200 4,800 5,600 90,840
Fixed Expenses: 1 Depreciation Expenses 2 Insurance 3 Maintenance Cost 4 Property tax 5 Supervision Staff
9,000 1,500 24,000 1,500 36,000
6 Power and Light (W-2) 7 Inspection (W-3) 8 Other semi variable expenses (W-4) TOTAL FIXED EXPENSES TOTAL FACTORY OVERHEAD
200 4,200 1,900 78,300 169,140
WORKINGS W-1
Calculation of Payrol taxes & fringe benefit Amount of Direct Labor Cost = 50,000 hours x 7.50 Amount of Indirect Labor Cost = 50,000 hours x 0.45
375,000 22,500
Total amount of Payrol
397,500
Amount of tax (Rs. 397,500 x 18%) W-2
71,550
CALCULATION OF POWER & LIGHT Hours High Value Low Value
50,000 40,000 10,000
Difference in Value Variable per hour cost = Difference in Cost Difference in hours
300 10,000
Variable Cost per hour Total Amount of semi variable expenses Less: Variable portion (50,000 hours x 0.03) Fixed Portion
W- 3
=
0.03 1,700 (1,500) 200
CALCULATION OF INSPECTION: Hours High Value Low Value
50,000 40,000 10,000
Difference in Value Variable per unit cost = Difference in Cost Difference in hours
1,200 10,000
Variable Cost per unit = Total Amount of semi variable expenses Less: Variable portion (50,000 hours x 0.12) Fixed Portion
=
0.12 10,200 (6,000) 4,200
W- 4
CALCULATION OF OTHER SEMI VARIABLE EXPENSES Hours High Value Low Value
50,000 40,000 10,000
Difference in Value Variable per unit cost = Difference in Cost Difference in hours
1,400 10,000
Variable Cost per unit = Total Amount of semi variable expenses Less: Variable portion (50,000 hours x 0.14) Fixed Portion
=
0.14 8,900 (7,000) 1,900
Level of Activities 90%
100%
45,000
50,000
4,500 20,250 64,395
5,000 22,500 71,550
1,350 5,400 6,300 102,195
1,500 6,000 7,000 113,550
9,000 1,500 24,000 1,500 36,000
9,000 1,500 24,000 1,500 36,000
200 4,200 1,900
200 4,200 1,900
78,300
78,300
180,495
191,850
Cost 1,700 1,400 300
Cost 10,200 9,000 1,200
Cost 8,900 7,500 1,400
Solution of Exercise No 4 60% Level 2,280
75%Level 2,850
100% level 3,800
1,920
2,400
3,200
Direct Material Direct Labour Fixed factory overhead Supplies (0.23/hour) Indirect Labour (1/8 of D/L) Other Charges (0.18 / hour)
2,856 17,280 670 442 2,160 346
3,570 21,600 670 552 2,700 432
4,760 28,800 670 736 3,600 576
Total Cost
23,753
29,524
39,142
Units produced Direct Labour hours
20 workers x 8 hours x 20 days
Required No. 1: Capacities Direct Labour hours
Variable Cost Utilities Maintenance Other Factory overhead Indirect Labour
80%
90%
100%
110%
24,000
27,000
30,000
33,000
28,800 38,400 19,200 16,800
32,400 43,200 21,600 18,900
36,000 48,000 24,000 21,000
39,600 52,800 26,400 23,100
Total Variable Cost
103,200
116,100
129,000
141,900
Fixed Cost Maintenance Indirect Labour Depreciation
40,000 130,000 90,000
40,000 130,000 90,000
40,000 130,000 90,000
40,000 130,000 90,000
Total Fixed Cost
260,000
260,000
260,000
260,000
Total Factory Overhead Cost
363,200
376,100
389,000
401,900
Required No. 2 Comparative Performance Report Capacities Direct Labour hours
Variable Cost Utilities Maintenance Other Factory overhead Indirect Labour
80%
Actual
Variance
24,000
24,000
Nil
28,800 38,400 19,200 16,800
24,200 38,100 8,400 19,600
4,600 U 300 F 10,800 U (2,800) U
Total Variable Cost
103,200
90,300
12,900 U
Fixed Cost Maintenance Indirect Labour Depreciation
40,000 130,000 90,000
40,000 130,000 91,500
(1,500) F
Total Fixed Cost
260,000
261,500
(1,500)
Total Factory Overhead Cost
363,200
351,800
11,400 U
Level of Activitie Particulars Direct Labor hours
80% 40,000
Variable Expenses: 1 Shop supplies (0.10 per direct labor hours) 2 Indirect labor (0.45 per direct labor hours) 3 Payrol taxes &Fringe benefit (W-1)
4,000 18,000 57,240
4 Power and Light (W-2) 5 Inspection (W-3) 6 Other semi variable expenses (W-4) TOTAL VARIABLE EXPENSES
1,200 4,800 5,600 90,840
Fixed Expenses: 1 Depreciation Expenses 2 Insurance 3 Maintenance Cost 4 Property tax 5 Supervision Staff
9,000 1,500 24,000 1,500 36,000
6 Power and Light (W-2) 7 Inspection (W-3) 8 Other semi variable expenses (W-4) TOTAL FIXED EXPENSES TOTAL FACTORY OVERHEAD
200 4,200 1,900 78,300 169,140
WORKINGS W-1
Calculation of Payrol taxes & fringe benefit Amount of Direct Labor Cost = 50,000 hours x 7.50 Amount of Indirect Labor Cost = 50,000 hours x 0.45
375,000 22,500
Total amount of Payrol
397,500
Amount of tax (Rs. 397,500 x 18%) W-2
71,550
CALCULATION OF POWER & LIGHT Hours High Value Low Value
50,000 40,000 10,000
Difference in Value Variable per hour cost = Difference in Cost Difference in hours
300 10,000
Variable Cost per hour Total Amount of semi variable expenses Less: Variable portion (50,000 hours x 0.03) Fixed Portion
W- 3
=
0.03 1,700 (1,500) 200
CALCULATION OF INSPECTION: Hours High Value Low Value
50,000 40,000 10,000
Difference in Value Variable per unit cost = Difference in Cost Difference in hours
1,200 10,000
Variable Cost per unit = Total Amount of semi variable expenses Less: Variable portion (50,000 hours x 0.12) Fixed Portion
=
0.12 10,200 (6,000) 4,200
W- 4
CALCULATION OF OTHER SEMI VARIABLE EXPENSES Hours High Value Low Value
50,000 40,000 10,000
Difference in Value Variable per unit cost = Difference in Cost Difference in hours
1,400 10,000
Variable Cost per unit = Total Amount of semi variable expenses Less: Variable portion (50,000 hours x 0.14) Fixed Portion
=
0.14 8,900 (7,000) 1,900
Level of Activities 90%
100%
45,000
50,000
4,500 20,250 64,395
5,000 22,500 71,550
1,350 5,400 6,300 102,195
1,500 6,000 7,000 113,550
9,000 1,500 24,000 1,500 36,000
9,000 1,500 24,000 1,500 36,000
200 4,200 1,900
200 4,200 1,900
78,300
78,300
180,495
191,850
Cost 1,700 1,400 300
Cost 10,200 9,000 1,200
Cost 8,900 7,500 1,400
Solution of Exercise No 4 60% Level 2,280
75%Level 2,850
100% level 3,800
1,920
2,400
3,200
Direct Material Direct Labour Fixed factory overhead Supplies (0.23/hour) Indirect Labour (1/8 of D/L) Other Charges (0.18 / hour)
2,856 17,280 670 442 2,160 346
3,570 21,600 670 552 2,700 432
4,760 28,800 670 736 3,600 576
Total Cost
23,753
29,524
39,142
Units produced Direct Labour hours
20 workers x 8 hours x 20 days
Required No. 1: Capacities Direct Labour hours
Variable Cost Utilities Maintenance Other Factory overhead Indirect Labour
80%
90%
100%
110%
24,000
27,000
30,000
33,000
28,800 38,400 19,200 16,800
32,400 43,200 21,600 18,900
36,000 48,000 24,000 21,000
39,600 52,800 26,400 23,100
Total Variable Cost
103,200
116,100
129,000
141,900
Fixed Cost Maintenance Indirect Labour Depreciation
40,000 130,000 90,000
40,000 130,000 90,000
40,000 130,000 90,000
40,000 130,000 90,000
Total Fixed Cost
260,000
260,000
260,000
260,000
Total Factory Overhead Cost
363,200
376,100
389,000
401,900
Required No. 2 Comparative Performance Report Capacities Direct Labour hours
Variable Cost Utilities Maintenance Other Factory overhead Indirect Labour
80%
Actual
Variance
24,000
24,000
Nil
28,800 38,400 19,200 16,800
24,200 38,100 8,400 19,600
4,600 U 300 F 10,800 U (2,800) U
Total Variable Cost
103,200
90,300
12,900 U
Fixed Cost Maintenance Indirect Labour Depreciation
40,000 130,000 90,000
40,000 130,000 91,500
(1,500) F
Total Fixed Cost
260,000
261,500
(1,500)
Total Factory Overhead Cost
363,200
351,800
11,400 U
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