Office expenses including salaries 70000 i nsurance

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Office expenses including salaries 70,000 I nsurance 4,000 Depreciation 20,000 Estimated direct labour hours 1,20,000 hours Answer Flexible Budget 50 % 60% 70% Capacity Capacity Capacity Variable overheads: Indirect Labour 8,750 10,500 12,250 Indirect Materials 7,000 8,400 9,800 Semi-variable overheads: Repair and Maintenance (1) 6,650 7,000 7,350 Electricity(2) 23,100 25,200 27,300 Fixed overheads: Office expenses including salaries 70,000 70,000 70,000 Insurance 4,000 4,000 4,000 Depreciation 20,000 20,000 20,000 Total overheads 1,39,500 1,45,100 1,50,700 Estimated direct labour hours 1,00,000 1,20,000 1,50,000 Overhead rate per hour 1.395 1.21 1.077 Workings: 1. The amount of Repairs and maintenance at 60% Capacity is 7,000. Out of this, 70% (i.e4,900) is fixed and remaining 30% (i.e2,100) is variable. The fixed portion remains constant at all levels of capacities. Only the variable portion will change according to change in the level of activity. Therefore, the total amount of repairs and maintenance for 50% and 70% capacities are calculated as follows: Repairs and maintenance 50% 60% 70% Fixed (70%) 4,900 4,900 4,900 Variable (30%) 1,750 2,100 2,450 Total 6,650 7,000 7,350

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194 2. Similarly, electricity expenses at different levels of capacity are calculated as follows: Electricity 50% 60% 70% Fixed (50%) 12,600 12,600 12,600 Variable (50%) 10,500 12,600 14,700 Total 23,100 25,200 27,300 Exercise 1. With the following data for a 60% activity, prepare a budget for production at 80% and 100% capacity Production at 60% activity 600 units Material Rs. 100 per unit Labour Rs. 40 per unit Expenses Rs. 10 per unit Factory Expenses Rs. 40,000 (40% fixed) Administration Expenses Rs. 30,000 (60% fixed) { Ans: Total Variable Cost at 60% Rs.1,68,000 at 70% Rs.2,10,000 and Fixed cost Rs.34,000} 2. The expenses for the production of 5,000 units in a factory are given as follows: Per Unit Rs. Materials 50 Labour 20 Variable Overhead 15 Fixed Overhead (Rs. 50,000) 10 Administrative Expenses (5% Variable) 10 Selling Expenses (20% fixed) 6 Distribution Expenses (10% fixed) 5 Total Cost of Sales per Unit 116 You are required to prepare a budget for the production of 7,000 units and 9,000 units. { Ans: Total Variable Cost for 7,000 Units Rs.6,63,600 for 9,000 units Rs.8,53,200 and Fixed cost Rs.1,06,000} Note: 1. In the problem, expenses per unit are calculated on the production level of 5,000 units. So, administrative expenses were Rs. 10 per unit, when the production level was 5,000 units. So, total administrative expenses were Rs. 50,000. Out of
195 which, 5% was variable cost (Rs. 0.50 per unit) and balance 95% was fixed cost, which works out to Rs. 47,500. Fixed costs Rs. 47,500 are constant, whatever be the level of activity. Note 2: Total Selling Expenses are Rs. 30,000. Out of which, 20% were fixed costs, which works out Rs. 6,000. Balance amount was variable cost Rs. 24,000, which works out to Rs. 4.80 per unit. Note 3: Total Distribution costs were Rs. 25,000. Out of which 10% were fixed costs, which works out to Rs. 2,500. Balance amount was variable cost Rs. 22,500, which works out to Rs. 4.50 per unit. 3. Prepare a Production Budget for each month and summarized Production Budget for the six months period ending 31st Dec., 1989 from the following of product X.

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• Spring '12
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