Problem 1 flexible and static budgets
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This document discusses flexible and static budgets for manufacturing overheads. It provides the monthly budgeted costs for overheads at 60% and 100% capacity. It then identifies which items are fixed, variable, and semi-variable costs. Maintenance and power/fuel are identified as having both fixed and variable cost components. The document concludes by preparing an overhead budget at 80% capacity level using the high-low method to determine the fixed and variable cost rates.
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Problem 1 flexible and static budgets
- 1. Flexible and static budgets Problem 1: The monthly budgets for manufacturing overheads of concerns are as follows. Capacity budgeted production (units) 60% 100% 600 1000 Rs. Rs. Wages 1200 2000 Consumable stores 900 1500 Maintenance 1100 1500 Power and Fuel 1600 2000 Depreciation 4000 4000 Insurance 1000 1000 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 80% 600 1000 800 Rs. Rs. Rs. Wages 1200 2000 2 1600 Consumable stores 900 1500 1.5 1200 Maintenance 1100 1500 1 500 1300 Power and Fuel 1600 2000 1 1000 1800 Depreciation 4000 4000 4000 4000 Insurance 1000 1000 1000 1000 High and low cost method Maintenance V.C = High cost – Low cost High activity – Low activity V.C = 1500 – 1100 1000 – 600 V.C = 1 per Unit High cost F.C = High cost - ( high activity X V.C per unit) F.C = 1500 - (1000 X 1) F.C = 500 Power and Fuel V.C = High cost – Low cost High activity – Low activity V.C = 2000 – 1600 1000 – 600 V.C = 1 per Unit
- 2. High cost F.C = High cost - ( high activity X V.C per unit) F.C = 2000 - (1000 X 1) F.C = 1000 For 80% Maintenance T.C = F.C + V.C T.V = 500 + ( 1 X 800 ) T.V = 1300 Power and Fuel T.C = F.C + V.C T.V = 1000 + ( 1 X 800 ) T.V = 1800