TOTAL ANNUAL OVERHEAD COST

Material set up costs 26,550

Machine running costs 66,400
Procurement Costs 48,000
Delivery Costs 54,320
TOTAL ANNUAL OVERHEAD COST 195,270

Overhead absorption rate :-

A B
Production and Sales Volume 15,000 12,000
Direct labour hours per unit 0.1 0.15
Total Labor Hours 1500 1800

Overhead absorption rate 28.3 TOTAL ANNUAL OVERHEAD COST/Total labour h

Cost per unit

A Raw material usage (2), A Raw material usage (3),
direct labour direct labour
(0.1),overheads (0.1) (0.15),overheads (0.15)
Raw material cost (1.2/unit) 2.4 3.6
Direct Labor (14.8/hour) 1.48 2.22
Overheads(28..3/hour) 2.83 4.245
Cost per unit 6.71 10.07

ii)

Cost per unit using activity based costimg

A (16 machines,7500
m/hrs,Procuremnet 24,
PARTICULARS Total Delivery 48)
Machine set up costs (36) 737.50 11800.00
Machine running costs(32100) 2.07 15514.02
Procurement costs(94) 510.64 12255.32
Delivery costs(140) 388 18624
58193.34
Units Produced 15,000
Overhead Cost per unit 3.88

WN 1
Machine Hours A B
Production and Sales Volume 15,000 12,000
Direct Machine Hours per unit 0.5 0.7
Total Machine Hours 7500 8400
 C
18,000
0.2
3600 6900

L OVERHEAD COST/Total labour hours

A Raw material usage (4),

direct labour (0.2),overheads
(0.2)
4.8
2.96
5.66
13.42

B(12 machines,8400 C(8 machines,16200

m/hrs,Procuremnet m/hrs,Procuremnet
28,Delivery 30) 42,Delivery 62)
8850.00 5900.00 26550
17375.70 33510.28 66400
14297.87 21446.81 48000.00
11640 24056 54320.00
52163.57 84913.09
12,000 18,000
4.35 4.72

C
18,000
0.9
16200 32100
Passenger km per month
Delhi-Chandigarh
1-way 250 km
round trip 500 km
No of days 8
No of passengers 45
Total 180000 passenger km pm

Delhi-Agra
1-way 210 km
round trip 420 km
No of days 10
No of passengers 45
Total 189000 passenger km pm

Delhi-Jaipur
1-way 270 km
round trip 540 km
No of days 6
No of passengers 45
Total 145800 passenger km pm
Total distance 11440 km/pm

Total Passenger km pm 514800 passenger km pm

passenger km pa
Total Passenger km pa 6177600

Salary (Driver) 24000 pm

Salary (Conductor) 21000 pm
Salary (Accountant) 5000 pm
Insurance 4800 pm
Diesel 160160 Rs
Road Tax 15915 pm
Lubricant 1144 pm
Permit 315 pm
Repair 1000 pm
Depreciation 20000 pm

Total 253334 pm
Per annum 3040008 pa

Takings X
Profit 30%
Passenger tax 20%
Total cost 253334

X 506668

Rate per passenger km 0.984204

Rate per passenger
Delhi-Chandigarh 246.05 Rs
Delhi-Agra 206.68 Rs
Delhi-Jaipur 265.73 Rs
x=253334+0.3x+0.2x
x 506668
Q3 Planned
NATURE OF EXPENSE MASTER BUDGET Expenses
Particulars (8,000 units) (10,000 units)
8000 10000
Salary of Foreman Fixed Expense 1,000 1,000
Indirect Labour Variable 720 900
0.09 0.09
Indirect Material Variable 800 1,000
unit cost 0.1 0.1
Repair and maintenance Semi variable 600 650
unit cost 0.08 0.07

Variable Component 200 250

Fixed Component 400 400
Power Semi variable 800 875
unit cost 0.1 0.09

Variable Component 300 375

Fixed Component 500 500
Tools consumed Variable 320 400
0.04 0.04
Rates and Taxes Fixed Expense 150 150
Depreciation Fixed Expense 800 800
Insurance Fixed Expense 100 100
Total Expenses 5,290 5,875

Working Note

Repairs & Maintenance

Change in Amount of Expense 50
Change in Level of Activity 2000
Variable Component 0.025

Power
Change in Amount of Expense 75
Change in Level of Activity 2000
Variable Component 0.038
 Expense as per Actual
Flexible Budget
(Budgeted Expense Expense
(Actual Expense
for 6,000 units) for 6,000 units) Difference
6000 6000
1,000 1,000 -
540 600 -60

600 700 -100

550 600 -50

725 740 -15

240 300 -60

150 150 -
800 800 -
100 100 -
4,705 4,990 -285
 Remarks

(Not a Fixed Expense, so let's check for unit cost change)

(Per unit cost is constant, meaining it’s a Variable Expense)
(Not a Fixed Expense, so let's check for unit cost change)
(Per unit cost is constant, meaining it’s a Variable Expense)
(Not a Fixed Expense, so let's check for unit cost change)
(Unit Cost is changing meaning its Semi-Variable Expense)

(Therefore we calculate Fixed and Variable Components)

(Not a Fixed Expense, so let's check for unit cost change)

(Unit Cost is changing meaning its Semi-Variable Expense)

(Therefore we calculate Fixed and Variable Components)

(Not a Fixed Expense, so let's check for unit cost change)

(Per unit cost is constant, meaining it’s a Variable Expense)

Since there is loss, the Foreman's Claim is False

 Q. 4 a) Information about MLM Ltd. For the month of January

Budget Actual
Output (units) 30000 32500
std. Hours 30000 33000
Fixed OH 45000 50000
Variable OH 60000 68000
Working Days 25 26

Solution:
Fixed Overhead Cost Variance

Budgeted Fixed OH 45000

Budgeted Prod 30000
std rate (cost/unit) 1.5
Actual Prod 32500
Absorbed Cost 48750
Actual Fixed overhead 50000
Fixed Overhead Cost Variance -1250 adverse

Fixed Overhead Volume Variance

Absorbed cost 48750

Budgeted Fixed OH 45000
Fixed Overhead Volume Variance ₹ 3,750.00 favourable

Fixed Overhead Capacity Variance

Std OH (Actual hours x Std Rate) 49500
Revised budgeted hours 31200
revised budgeted OH 46800
Fixed Overhead Capacity Variance 2700 favourable

Fixed Overhead Efficiency Variance

Absorbed cost 48750
Std OH 49500
Fixed Overhead Efficiency Variance -750 adverse

Fixed Calendar Variance

Std rate/ day 1800
Fixed Calendar Variance 1800 favourable
Q) 4.B

Cost Sheet

Materials(Less Scrap)
Dept. X 7000
Dept. Y 850
Dept. Z 400
Total 8250

Direct Wages

Dept. X: 1000 hours @₹1 per hour 1000

Dept. Y: 2000 hours @₹1.5 per hour 3000

Dept. Z: 5000 hours @₹2 per hour 10000

Total 14000

Prime Cost 22250

Overheads:
Dept. X 1000
Dept. Y 1000
Dept. Z 3125
Total Overheads 5125
Total Cost 27375
Total overheads in Dept./Total labor hours in Dept. x Labor hours in Dept. for job No. 58
10000/10000x1000
15000/30000x2000
25000/40000x5000
hours in Dept. for job No. 58