Solution of Pb # 18.1 of M& U

Required no. 1: The manufacturing budget for January

Nos. of units planned for production (January) 4,000

Nos. of direct labor hours required for planned units (4,000 units x 2 hours per unit) 8,000

1 Direct Material used: Direct material (4,000 units x 6 lbs x Rs. 1.50)

2 Direct Labor used: Direct labor (4,000 units x 2 hours x Rs. 6)

PRIME COST 3 Factory overhead:

Variable cost: Indirect Labor (6,650 / 10,000 hours = 0.665 x 8,000 hours) Indirect Material (600 / 10,000 hours = 0.06 x 8,000 hours) Repairs (750 / 10,000 hours = 0.075 x 8,000 hours)

TOTAL VARIABLE COST

Fiixed cost: Depreciation Supervision

TOTAL FIXED COST

TOTAL MANUFACTURING COST

Required no. 2: Performance report: Flex. Budget

Particular Budgeted Budgeted Actual Variance Value Value Value January January January

(Adjusted) 100% 95%

Nos. of units 4,000 3,800 3,800 -

Direct Material 36,000 34,200 36,000 1,800 Direct Labor 48,000 45,600 50,400 4,800 Factory overhead: Variable Cost:

Indirect Labor 5,320 5,054 6,000 946 Indirect Material 480 456 600 144 Repairs 600 570 1,800 1,230

Fixed cost: Depreciation 3,250 3,250 3,250 - Supervision 3,000 3,000 3,000 -

96,650 92,130 101,050 8,920

units

hours

36,000

48,000

84,000

5,320 480 600 6,400

3,250 3,000 6,250 12,650

96,650

U U

U U U

U

Solution of Problem No. 18-2

Level of ActivitiesParticulars 80%

Direct Labor hours 40,000

Variable Expenses:1 Shop supplies (0.10 per direct labor hours) 4,000 2 Indirect labor (0.45 per direct labor hours) 18,000 3 Payrol taxes &Fringe benefit (W-1) 57,240

4 Power and Light (W-2) 1,200 5 Inspection (W-3) 4,800 6 Other semi variable expenses (W-4) 5,600

TOTAL VARIABLE EXPENSES 90,840

Fixed Expenses:1 Depreciation Expenses 9,000 2 Insurance 1,500 3 Maintenance Cost 24,000 4 Property tax 1,500 5 Supervision Staff 36,000

6 Power and Light (W-2) 200 7 Inspection (W-3) 4,200 8 Other semi variable expenses (W-4) 1,900

TOTAL FIXED EXPENSES 78,300

TOTAL FACTORY OVERHEAD 169,140

WORKINGS

W-1 Calculation of Payrol taxes & fringe benefit

AT 100% Level of Activity

Amount of Direct Labor Cost = 50,000 hours x 7.50 375,000 Amount of Indirect Labor Cost = 50,000 hours x 0.45 22,500

Total amount of Payrol 397,500

Amount of tax (Rs. 397,500 x 18%) 71,550

W-2 CALCULATION OF POWER & LIGHT

Hours

High Value 50,000 Low Value 40,000

Difference in Value 10,000

300 Difference in hours 10,000

Variable Cost per hour 0.03

Variable per hour cost = Difference in Cost

At 50,000 hours:

Total Amount of semi variable expenses = 1,700 Less: Variable portion (50,000 hours x 0.03) (1,500)Fixed Portion 200

W- 3 CALCULATION OF INSPECTION:

Hours

High Value 50,000 Low Value 40,000

Difference in Value 10,000

1,200 Difference in hours 10,000

Variable Cost per unit = 0.12

Total Amount of semi variable expenses = 10,200 Less: Variable portion (50,000 hours x 0.12) (6,000)Fixed Portion 4,200

W- 4 CALCULATION OF OTHER SEMI VARIABLE EXPENSES

Variable per unit cost = Difference in Cost

Hours

High Value 50,000 Low Value 40,000

Difference in Value 10,000

1,400 Difference in hours 10,000

Variable Cost per unit = 0.14

Total Amount of semi variable expenses = 8,900 Less: Variable portion (50,000 hours x 0.14) (7,000)Fixed Portion 1,900

Variable per unit cost = Difference in Cost

Level of Activities90% 100%

45,000 50,000

4,500 5,000 20,250 22,500 64,395 71,550

1,350 1,500 5,400 6,000 6,300 7,000 102,195 113,550

9,000 9,000 1,500 1,500 24,000 24,000 1,500 1,500 36,000 36,000

200 200 4,200 4,200 1,900 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 N. Capacity

60% Level 75%Level 100% level

Units produced 2,280 2,850 3,800

Direct Labour hours 1,920 2,400 3,200

Variable Cost:Direct Material (Rs. 1.25 / unit) 2,856 3,570 4,760 Direct Labour (Rs. 9 / hour) 17,280 21,600 28,800 Supplies (0.23/hour) 442 552 736 Indirect Labour (1/8 of D/L) 2,160 2,700 3,600 Other Charges (0.18 / hour) 346 432 576 Total Variable cost: 23,083 28,854 38,472

Fixed Cost:Fixed factory overhead 670 670 670

Total Fixed Cost 670 670 670

Total Cost 23,753 29,524 39,142

20 workers x 8 hours x 20 days

Solution of Exercise No 5

60% Level 80%Level 100% level

Units produced 1,440 1,920 2,400

Direct Labour hours 960 1,280 1,600

Variable Cost:Direct Material (Rs. 2 / unit) 2,880 3,840 4,800 Direct Labour (Rs.6.3 / hour) 6,048 8,064 10,080 Supplies (0.25/hour) 240 320 400 Indirect Labour (1/6 of D/L) 1,008 1,344 1,680 Other Charges (0.45 / hour) 432 576 720 Total Variable Cost 10,608 14,144 17,680

Fixed Cost:Fixed factory overhead 960 960 960 Total Fixed Cost 960 960 960

Total Cost 11,568 15,104 18,640

10 workers x 8 hours x 20 days

Required No. 1:

Capacities 80% 90% 100% 110%

Direct Labour hours 24,000 27,000 30,000 33,000

Variable CostUtilities 28,800 32,400 36,000 39,600 Maintenance 38,400 43,200 48,000 52,800 Other Factory overhead 19,200 21,600 24,000 26,400 Indirect Labour 16,800 18,900 21,000 23,100

Total Variable Cost 103,200 116,100 129,000 141,900

Fixed CostMaintenance 40,000 40,000 40,000 40,000 Indirect Labour 130,000 130,000 130,000 130,000 Depreciation 90,000 90,000 90,000 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

Capacities 80% Actual Variance

Direct Labour hours 24,000 24,000 Nil

Variable CostUtilities 28,800 24,200 4,600 UMaintenance 38,400 38,100 300 FOther Factory overhead 19,200 8,400 10,800 UIndirect Labour 16,800 19,600 (2,800) U

Total Variable Cost 103,200 90,300 12,900 U

Fixed CostMaintenance 40,000 40,000 - Indirect Labour 130,000 130,000 - Depreciation 90,000 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

Required No. 2 Comparative Performance Report