| Document below the workings used to calculate your answer. Insert as many rows as you feel is required. | |||||||||||
| Part A | |||||||||||
| (a) Variable overhead cost per machine hours= | Change in overhead | $70400- $55520 | 14880 | ||||||||
| Change in hours | 12000-8000 | 4000 | |||||||||
| Variable overhead cost per machine hours | $ 3.72 | ||||||||||
| (b) The Fixed cost | Fixed Cost= Total cost – (variable cost per unit * number of hours at that level) | 70400-(3.72*12000) | $ 25,760.00 | ||||||||
| Fixed Cost= Total cost – (variable cost per unit * number of hours at that level) | 55520-(3.72*8000) | $ 25,760.00 | |||||||||
| (c) Total overheads at 10500 hours | Variable Overheads | 3.72*10500 | $ 39,060.00 | ||||||||
| Fixed overheads | $ 25,760.00 | ||||||||||
| total overheads at 10500 hours | $ 64,820.00 | ||||||||||
| Part B | |||||||||||
| (a) Fixed costs | Fixed cost is the cost that remains constant irrespective of the level of activity. | ||||||||||
| Example: Rent, depreciaition, insurance premium paid for the factory. Even at the zero level of activity these costs are incurred. | |||||||||||
| (b) Variable costs | Unlike fixed cost, variable costs changes with the change in the level of the production undertaken by a firm. | ||||||||||
| With each additional unit of production, variable cost increases and it is directly proportional to the production level | |||||||||||
| Example: Raw Material Cost, Labour Cost | |||||||||||
| ©Semi Variable Cost | This is the cost that contains both the components i.e. variable as well as fixed. | ||||||||||
| Till a certain level the cost remains fixed and beyond that level of production, it starts varing with the variation in the production level in direct proportion. | |||||||||||
| Example: An Internet Plan involves $ 50 till 50 GB and after this it charges $ 1 for each MB. | |||||||||||
| Therefore, till 50 GB the cost remains fixed and after that it increases with the increase in consumption of each MB of internet data. | |||||||||||
| Document below the workings used to calculate your answer. Insert as many rows as you feel is required. | |||||||||||
| Part A | |||||||||||
| overhead capacity variance | |||||||||||
| Budgeted overhead recovery rate | Budgeted Overhead | $ 2,40,000.00 | $ 1.20 | ||||||||
| Budgeted Labour Hours | 200000 | ||||||||||
| Overhead Capacity variance | Absorbed Ovehead – Budgeted Overhead | ||||||||||
| Abosrbed overhead | Actual Hours Worked * Budgeted Recovery rate | ||||||||||
| 210000*1.20 | |||||||||||
| $ 2,52,000.00 | |||||||||||
| Overhead Capacity variance= | $252000-$240000 | ||||||||||
| $ 12,000.00 | |||||||||||
| Part B | Under / Over applcaation of overheads= | Applied Overhead – Actual Overhead | |||||||||
| $ 252000- $ 246000 | |||||||||||
| $ 6,000.00 | |||||||||||
| Part C | Overhead are over applied | ||||||||||
| Flexible Budget at actual hours i.e. 210000 | |||||||||||
| Fixed Ovehead | (160000*210000)/200000 | ||||||||||
| $ 1,68,000.00 | |||||||||||
| Variable Overhead | (80000*210000)/200000 | ||||||||||
| $ 84,000.00 | |||||||||||
| Part D | Overheads Applied= | Budgeted Recovery Rate * Actual Hours | |||||||||
| = | 1.20*210000 | ||||||||||
| $ 2,52,000.00 | |||||||||||
| Part E | Budgeted overhead recovery rate | Budgeted Overhead | $ 2,40,000.00 | $ 1.20 | |||||||
| Budgeted Labour Hours | 200000 | ||||||||||
| Document below the workings used to calculate your answer. Insert as many rows as you feel is required. | |||||||||||
| Part A | |||||||||||
| Budgeted fixed overhead= | Budgeted Machine Hours*Budgeted Fixed Overhead Recovery Rate | ||||||||||
| 21000*13 | |||||||||||
| $ 2,73,000.00 | |||||||||||
| Part B | |||||||||||
| Actual overhead incurred= | Actual Hours * Actual Rate | ||||||||||
| (20000*25.25) | |||||||||||
| Actual overhead incurred= | $ 5,05,000.00 | ||||||||||
| Workings: | |||||||||||
| Spending Variance= | Actual hours (Actual Rate – Standard Rate) | ||||||||||
| 5000= | 20000( Actual Rate – 25) | ||||||||||
| 5000= | Actual Hours * Actual Rate | – | Actual Hours * Standard Rate | ||||||||
| 5000= | (20000* Actual Rate) | – | (20000*25) | ||||||||
| Actual Overhead Rate= | $ 25.25 | ||||||||||
| Part C | |||||||||||
| Overheads Applied= | Budgeted Recovery Rate * Actual Hours | ||||||||||
| 25*20000 | |||||||||||
| $ 5,00,000.00 | |||||||||||
| Job 77 | Job 78 | Job 79 | Job 80 | Job 81 | Total | ||||||
| Balance b/d | 31,730 | 31,730 | |||||||||
| Joey Ltd | Job no. | 76 | |||||||||
| For | Mr. X | ||||||||||
| Details | Not yet invoiced | ||||||||||
| Quantity | XX | ||||||||||
| Material Cost | Direct Labor Cost | Overhead Applied | |||||||||
| Date | Ref | Amount | Date | Ref | Amount | Date | Rate | Amount | |||
| Summary: | Materials | ||||||||||
| Labor | |||||||||||
| Factory overhead | |||||||||||
| Other | |||||||||||
| Total | 55,470.00 | Remarks: | Job completed at $55470 | ||||||||
| Joey Ltd | Job no. | 77 | |||||||||
| For | Mr. X | ||||||||||
| Details | Under process | ||||||||||
| Quantity | XX | ||||||||||
| Material Cost | Direct Labor Cost | Overhead Applied | |||||||||
| Date | Ref | Amount | Date | Ref | Amount | Date | Rate | Amount | |||
| xx/xx/20xx | xx | xx/xx/20xx | xx | 2,520.00 | xx/xx/20xx | 160.00 | 2,880.00 | ||||
| Total | 2,520.00 | 2,880.00 | |||||||||
| Summary: | Materials | – | |||||||||
| Labor | 2,520.00 | ||||||||||
| Factory overhead | 2,880.00 | ||||||||||
| Other | – | ||||||||||
| Total | 5,400.00 | Remarks: | Job is finished at total cost of $3780 | ||||||||
| Joey Ltd | Job no. | 78 | |||||||||
| For | Mr. X | ||||||||||
| Details | Under process | ||||||||||
| Quantity | XX | ||||||||||
| Material Cost | Direct Labor Cost | Overhead Applied | |||||||||
| Date | Ref | Amount | Date | Ref | Amount | Date | Rate | Amount | |||
| xx/xx/20xx | xx | 15,940.00 | xx/xx/20xx | xx | 11,200.00 | xx/xx/20xx | 160.00 | 12,800.00 | |||
| Total | 15,940.00 | 11,200.00 | 12,800.00 | ||||||||
| Summary: | Materials | 15,940.00 | |||||||||
| Labor | 11,200.00 | ||||||||||
| Factory overhead | 12,800.00 | ||||||||||
| Other | – | ||||||||||
| Total | 24,000.00 | Remarks: | Job is finished at total cost of $24,000 | ||||||||
| Joey Ltd | Job no. | 79 | |||||||||
| For | Mr. X | ||||||||||
| Details | Under process | ||||||||||
| Quantity | XX | ||||||||||
| Material Cost | Direct Labor Cost | Overhead Applied | |||||||||
| Date | Ref | Amount | Date | Ref | Amount | Date | Rate | Amount | |||
| xx/xx/20xx | xx | 21,860.00 | xx/xx/20xx | xx | 14,700.00 | xx/xx/20xx | 160% | 16,800.00 | |||
| Total | 21,860.00 | 14,700.00 | 16,800.00 | ||||||||
| Summary: | Materials | 21,860.00 | |||||||||
| Labor | 14,700.00 | ||||||||||
| Factory overhead | 16,800.00 | ||||||||||
| Other | – | ||||||||||
| Total | 31,500.00 | Remarks: | Job completed @ 31500 | ||||||||
| Joey Ltd | Job no. | 80 | |||||||||
| For | Mr. X | ||||||||||
| Details | Under process | ||||||||||
| Quantity | XX | ||||||||||
| Material Cost | Direct Labor Cost | Overhead Applied | |||||||||
| Date | Ref | Amount | Date | Ref | Amount | Date | Rate | Amount | |||
| xx/xx/20xx | xx | 16,600.00 | xx/xx/20xx | xx | 9,800.00 | xx/xx/20xx | 160% | 11,200.00 | |||
| Total | 16,600.00 | 9,800.00 | 11,200.00 | ||||||||
| Summary: | Materials | 16,600.00 | |||||||||
| Labor | 9,800.00 | ||||||||||
| Factory overhead | 11,200.00 | ||||||||||
| Other | – | ||||||||||
| Total | 21,000.00 | Remarks: | Job completed @ 21000 | ||||||||
| Joey Ltd | Job no. | 81 | |||||||||
| For | Mr. X | ||||||||||
| Details | Under process | ||||||||||
| Quantity | XX | ||||||||||
| Material Cost | Direct Labor Cost | Overhead Applied | |||||||||
| Date | Ref | Amount | Date | Ref | Amount | Date | Rate | Amount | |||
| xx/xx/20xx | xx | 13,110.00 | xx/xx/20xx | xx | 4,760.00 | xx/xx/20xx | 160% | 5,440.00 | |||
| Total | 13,110.00 | 4,760.00 | 5,440.00 | ||||||||
| Summary: | Materials | 13,110.00 | |||||||||
| Labor | 4,760.00 | ||||||||||
| Factory overhead | 5,440.00 | ||||||||||
| Other | – | ||||||||||
| Total | 10,200.00 | Remarks: | Job not completed | ||||||||
| Material Control | |||||||||||
| Date | Particulars | Amount | Date | Particulars | Amount | ||||||
| Balance on July 01 | 52 060 | Work in progress | 67 510 | ||||||||
| Account payable | 77 460 | Factory overhead | 4 400 | ||||||||
| Balance on July 31 | 57 610 | ||||||||||
| 129 520 | 129 520 | ||||||||||
| Labour Control | |||||||||||
| Date | Particulars | Amount | Date | Particulars | Amount | ||||||
| Balance on July 01 | – | Work in progress | 2 520 | ||||||||
| Bank | 67 920 | Factory overhead | 47 300 | ||||||||
| Balance on July 31 | 18 100 | ||||||||||
| 67 920 | 67 920 | ||||||||||
| Factory Overhead Control | |||||||||||
| Date | Particulars | Amount | Date | Particulars | Amount | ||||||
| Material control account | 4 400 | Work in progress | |||||||||
| Labor control account | 47 300 | ||||||||||
| Work in Process | |||||||||||
| Date | Particulars | Amount | Date | Particulars | Amount | ||||||
| Balance on July 01 | 31 730 | Finished goods account | 55 470 | ||||||||
| Material control account | 67 510 | Balance July 31 | 21 000 | ||||||||
| Labor control account | 2 520 | ||||||||||
| Factory overhead control account | |||||||||||
| Finished Goods | |||||||||||
| Date | Particulars | Amount | Date | Particulars | Amount | ||||||
| Balance on July 01 | 55 470 | Cost of goods sold | |||||||||
| WIP control account | Balance July 31 | ||||||||||
| Part A | |||||||||||
| Budgeted overhead per hour = | Total Budgeted overhead | ||||||||||
| Budgeted Labour hours | |||||||||||
| 890000 | |||||||||||
| 400000 | |||||||||||
| 2.23 | |||||||||||
| Applied overhead = | Actual Labour hours* Rudgeted overhead recovery rate | ||||||||||
| 380000*2.23 | |||||||||||
| $ 8,45,500.00 | |||||||||||
| Actual overheads= | $ 8,40,000.00 | ||||||||||
| Applied overhead > Actual Overhead | |||||||||||
| Overhead are over applied | |||||||||||
| Part B | |||||||||||
| Spending Overhead= | Actual Factory overheads -Budgeted Allowance based on actual hours | ||||||||||
| Actual Factory Overhead= | $ 8,40,000.00 | ||||||||||
| Budgeted Allowance based on actual hours= | $ 8,45,500.00 | ||||||||||
| (380000*2.23) | |||||||||||
| Part C | Capacity Variance= | Standard Rate (Budgeted production hours – Actual production hours ) | |||||||||
| 2.23 * (400000-380000) | |||||||||||
| $ 44,600.00 | |||||||||||
| Part A | |||||||||||
| Selling price per unit | 50 | ||||||||||
| Less | Variable cost per unit | ||||||||||
| Production cost | 30 | ||||||||||
| Selling cost | 5 | 35 | |||||||||
| Contribution per unit | 15 | ||||||||||
| No. of units | 20000 | ||||||||||
| Total Contribution | 20000 | ||||||||||
| Less | Fixed cost | ||||||||||
| Production cost | (5* 20000) | 100000 | |||||||||
| Selling cost | (1*20000) | 20000 | 120000 | ||||||||
| Profit | 180000 | ||||||||||
| PV ratio | Contribution | ||||||||||
| Sales | |||||||||||
| 300000 | |||||||||||
| 1000000 | |||||||||||
| PV ratio | 30% | ||||||||||
| Breakeven sales in units | Total fixed cost | 120000 | $ 8,000.00 | ||||||||
| Contribution per unit | 15 | ||||||||||
| Breakeven sales in dollars | Total fixed cost | 120000 | $ 4,00,000.00 | ||||||||
| PV Ratio | 30% | ||||||||||
| Part B | Selling price per unit | 50 | |||||||||
| Variable cost per unit | |||||||||||
| Production cost | 30 | ||||||||||
| Selling cost | 5 | 35 | |||||||||
| Contribution per unit | 15 | ||||||||||
| No. of units | 40000 | ||||||||||
| Total Contribution | 600000 | ||||||||||
| Fixed cost | |||||||||||
| Production cost | (5* 20000) | 100000 | |||||||||
| Selling cost | (1*20000) | 20000 | |||||||||
| Additional | Rent | 210000 | 330000 | ||||||||
| Profit | 270000 | ||||||||||
| PV ratio | Contribution | ||||||||||
| Sales | |||||||||||
| 600000 | |||||||||||
| 2000000 | |||||||||||
| PV ratio | 30% | ||||||||||
| Breakeven sales in units | Total fixed cost | 330000 | 22000 | ||||||||
| Contribution per unit | 15 | ||||||||||
| Breakeven sales in dollars | Total fixed cost | 330000 | $ 11,00,000.00 | ||||||||
| PV Ratio | 30% | ||||||||||
| Part C | Margin of Safety= | Total Sales -BEP sales | |||||||||
| 2000000-1100000 | |||||||||||
| $ 9,00,000.00 | |||||||||||
| Part A | Fixed cost | 300000 | |||||||||
| Selling price per unit | $ 40.00 | ||||||||||
| Variable cost per unit | $ 24.00 | ||||||||||
| Contribution per unit | $ 16.00 | ||||||||||
| Breakeven Sales in Units= | Total fixed cost | ||||||||||
| Contribution per unit | |||||||||||
| $ 3,00,000.00 | |||||||||||
| $ 16.00 | |||||||||||
| Breakeven Sales in Units= | 18750 | ||||||||||
| Part B | Desired Profit (after tax) | $ 70,000.00 | |||||||||
| Tax Rate | 30% | ||||||||||
| Desired Profit (before tax) | $ 1,00,000.00 | ||||||||||
| Sales in units= | Total Fixed Cost + Desired Profit | ||||||||||
| Contribution per unit | |||||||||||
| 300000+100000 | |||||||||||
| 16 | |||||||||||
| 300000 | |||||||||||
| 16 | |||||||||||
| 18750 | |||||||||||
| Part B | |||||||||||
| Breakeven Sales in Dollars= | Total fixed cost | 120000 | $ 2,00,000.00 | ||||||||
| PV Ratio | 60% | ||||||||||
| Sales | 500000 | ||||||||||
| Less | Variable Cost: | ||||||||||
| Manufacturing costs | 120000 | ||||||||||
| Selling and administration cost | 80000 | 200000 | |||||||||
| Contribution | 300000 | ||||||||||
| Less | Fixed Costs | ||||||||||
| Manufacturing costs | 60000 | ||||||||||
| Selling and administration cost | 60000 | 120000 | |||||||||
| Profit | 180000 | ||||||||||
| PV ratio | Contribution | ||||||||||
| Sales | |||||||||||
| 300000 | |||||||||||
| 500000 | |||||||||||
| 60% | |||||||||||
| Sales in Dollars | Total Fixed Cost + Desired Profit | 120000+90000 | 210000 | $ 3,50,000.00 | |||||||
| PV ratio | 60% | 60% | |||||||||
| Sales | $ 5,00,000.00 | ||||||||||
| Variable Cost: | |||||||||||
| Manufacturing costs | $ 1,20,000.00 | ||||||||||
| Selling and administration cost | $ 80,000.00 | $ 2,00,000.00 | |||||||||
| Contribution | $ 3,00,000.00 | ||||||||||
| Fixed Costs | |||||||||||
| Manufacturing costs | $ 60,000.00 | ||||||||||
| Selling and administration cost | $ 60,000.00 | $ 1,20,000.00 | |||||||||
| Profit | $ 1,80,000.00 | ||||||||||
| Profit= | Sales – Variable cost – Fixed cost | ||||||||||
| x * 0.20= | x-200000-120000 | ||||||||||
| 0.80x= | $ 3,20,000.00 | ||||||||||
| x= | $ 4,00,000.00 | ||||||||||
| Sales in Dollars | Total Fixed Cost + Desired Profit | 120000+300000 | 420000 | $ 7,00,000.00 | |||||||
| PV ratio | 60% | 60% | |||||||||
| Desired profit after tax | $ 2,10,000.00 | ||||||||||
| Desired profit before tax | $ 3,00,000.00 | ||||||||||
| DRURY, C.M., 2013. Management and cost accounting. Springer. | |||||||||||
| Hansen, D., Mowen, M. and Guan, L., 2007. Cost management: accounting and control. Cengage Learning. | |||||||||||
| Hilton, R.W. and Platt, D.E., 2013. Managerial accounting: creating value in a dynamic business environment. McGraw-Hill Education. | |||||||||||
| Horngren, C.T., Bhimani, A., Datar, S.M., Foster, G. and Horngren, C.T., 2002. Management and cost accounting. Harlow: Financial Times/Prentice Hall. | |||||||||||
| Zimmerman, J.L. and Yahya-Zadeh, M., 2011. Accounting for decision making and control. Issues in Accounting Education, 26(1), pp.258-259. |
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