Question

Answer all the questions .Each question carries 5 Marks 1) From the following data prepare a flexible budget for production of 40000 units,50000 units and 75,000 units clearly show variable cost ,fixed cost, and total cost. Also indicate the element wise cost per unit Budgeted output is 100,000 units and the budgeted cost per unit is given below Direct Material AED 95/unit. Direct Labour AED 50/unit. Production over Head (variable) AED40/unit. Production overhead (fixed) AED5/unit. Administration overhead (fixed) AED 5/unit. Selling overhead (20% fixed) AED10/unit. Distribution overhead ( 10% fixed ) AED 20/unit 2) UAE Plastics Ltd make plastic Buckets, An analysis of their accounting reveals :At present the company is manufacturing 2000 Buckets at 20 % Capacity ,The UAE plastic is expecting an export order which will utilize either 50 % ,75 % or 100 % of the production Capacity Variable cost per unit AED 20; Fixed cost is AED 50,000 per annum; Selling price per bucket is AED 70 With the above information A) What is the contribution per unit of the Bucket? B) If 50 %,75% and 100 % buckets are manufactured per annum compute the total contribution per annum (Capacity wise) c) What is the total profit per annum if the above three different capacities are manufactured? D) P/V Ratio under ,20 % ,50 %,75% and 100 % capacity E) What will be the Margin of safety if the export order materializes?

Answer 1

Given, Budgeted units = 100,000 units
Total Fixed production overhead = 100,000*5 = 500,000
Fixed Administrative overhead = 100,000*5 = 500,000
Fixed selling overhead = 100,000*10*20% = 200,000
Variable Selling overhead/unit = 10*80% = 8
Fixed Distribution overhead = 100,000 *20*10% = 200,000
Variable Distribution overhead = 20*90% = 18
Flexible Budget
Particulars	40,000 units	50,000 units	75,000 units
Variable cost
Direct material	3,800,000	4,750,000	7,125,000
Direct labour	2,000,000	2,500,000	3,750,000
Production overhead	1,600,000	2,000,000	3,000,000
Selling overhead	320,000	400,000	600,000
Distribution overhead	720,000	900,000	1,350,000
Total variable cost	8,440,000	10,550,000	15,825,000
Fixed Cost
Production overhead	500,000	500,000	500,000
Administrative overhead	500,000	500,000	500,000
Selling overhead	200,000	200,000	200,000
Distribution overhead	200,000	200,000	200,000
Total Fixed cost	1,400,000	1,400,000	1,400,000
Total Cost	9,840,000	11,950,000	17,225,000
Cost/unit	246.00	239.00	229.67
Budgeted Cost/unit
Particulars	Amount
Variable cost
Direct material	95
Direct labour	50
Production overhead	40
Selling overhead	8
Distribution overhead	18
Total variable cost	211
Fixed Cost
Production overhead	5
Administrative overhead	5
Selling overhead	2
Distribution overhead	2
Total Fixed cost	14
Total Cost/unit	225