Suggested Solution Sem test 1

a) Break even calculation Televisions

High cost
Low cost
Cost differential

High volume
Low Volume

Variable cost per unit

Variable costs
Total cost

Fixed cost element

Units 2,800 per unit

Revenue per unit 8,500 8,500
Revenue 23,800,000 5,649
Variable cost (15,818,133)
Contribution per unit 7,981,867 2,851
Fixed costs (3,389,600)
Budgeted profit 4,592,267

Contribution ratio 33.54%

Break even revenue/units 1,189

Fixed costs 3,389,600
Contribution ratio 34%
Breakeven revenue 10,106,969 10,106,969

Margin of safety
Budgeted sales 23,800,000
Margin of safety 58%

Operating Leverage 1.74

Discussion:
A higher selling price would result in a greater contribution ratio, so each item sold would contribute
more to the fixed costs
The margin of safety is also higher at the highr selling price. This indicates that the fixed costs are relatively low whe
compared to the variabl costs.
 The low fixed costs is also evident in the low DOL, while slightly higher on the lower selling price (given the higher
contribition per unit relative to the fixed costs)

Communication

b) Budgeted expenditure for manufacturing division

total per unit U Per unit N Per unit I

Volume 159,000 40,000 68,000

Labour 349,500 3.00 120,000 1.50 102,000 2.50

Material 316,800 1.80 72,000 2.40 163,200 1.60

Variable ov 237,600 1.49 59,774 1.49 101,615 1.49

Fixed overh 400,000 3.43 137,339 1.72 116,738 2.86

Total budget 1,462,900 9.73 429,113 7.11 551,553 8.46

Total variable overheads allocation: (given)

Raw material 120 40 40
Volume 40,000 68,000
Total raw m 6,360,000 1,600,000 2,720,000

Variable cost per component: 237 600/6 360 000 = 0,037

Total variable overheads (R0,037 x 40) 1

Total labour hours: U N

Hours Hours

Hours per component 0.20 0.10

R3/R15 R1,5/R15

Total hours 8,000 6,800

Allocated fixed overheads per labour hour: R400 000/23 300 = 17

Fixed overheads per unit: 3.43 1.72

c) Reconciliation

Flexed budget
Standard Standard Standard
total per unit U Per unit N Per unit I
Volume 154,000 44,000 61,000

Labour 346,000 3.00 132,000 1.50 91,500 2.50

Material 304,000 1.80 79,200 2.40 146,400 1.60

Variable ov 230,076 1.49 65,736 1.49 91,134 1.49

Fixed overh 395,978 3.43 151,052 1.72 104,737 2.86

Total budget 1,276,054 9.73 427,988 7.11 433,771 8.46

Budgeted costs

Actual hours (19 800 x Actual Rate (R15,65) 310,000

Actual hours @ standard rate (19 800 x R15) 297,000
Labour rate variance
Actual Output at standard rate 346,000
Labour efficiency variance

Actual quantity used for production x Actual price 338,000

Material price variance
Usage R304 000 x 98,5% 299,440
Material usage variance
Actual output x standard price per unit 304,000

Actual expenditure 408,000

Fixed overheads expenditure variance
Budget fixed costs 400,000
Fixed overhead capacity variance
Input (19800 hours) x std allocation rate (R17,17) 339,966
Fixed overhead efficiency variance
Output x standard price per unit 395,978

Actual material usage x actual rate 248,000

variable overhead expenditure variance
Actual material usage 6 067 600 x std rate (R0,04) 242,704
Variable overhead efficiency variance
Actual output x standard price per unit 230,076

Actual manufacturing costs

 Labour
Material
Variable manufacturing overheads
Fixed manufacturing overheads

Workings - variable costing:

Actual material used: (44000+61000+49000)*40*0,985 6,067,600
Standard rate: R1,49/40 units 0.0373
 Mark:

20,337,600 Total cost fixed variable units VC per unit

16,948,000 16,948,000 ### ### 2,400.00 5,649.33
3,389,600 1.00
20,337,600 ### ### 3,000.00
3,000
2,400 38,785,600 ### ### 6,000.00
600 1.00

5,649 1.00

13,558,400 1.00
16,948,000

3,389,600 1.00

2,400 per unit

10,500 10,500
25,200,000 2.00
(13,558,400) 5,649 1.00
11,641,600 4,851
(3,389,600)
8,252,000 2.00

46% 1.00

699
3,389,600
46%
7,337,301 7,337,301 2.00

25,200,000
71% 2.00

1.41 2.00

d would contribute
2.00
fixed costs are relatively low when
2.00
er selling price (given the higher
2.00

1.00

Available 24.00
Maximum 20.00

unit I
51,000

127,500 2.00

81,600 2.00

76,211 2.00

145,923 2.00

482,234 2.00

40
51,000
2,040,000

I
Hours

0.17 1.00
R2,5/R15

8,500 1.50

1.00

2.86 1.50

Available 15.00
Max 15.00
unit I
49,000

122,500

78,400

73,206

140,189

414,295

(1,276,054)

(13,000) A 2.00

49,000 F 2.00

(38,560) A 2.00

4,560 F 2.00

2.00
(8,000) A

(60,034) A 2.00

56,012 F 2.00

(5,296) A 2.00

(12,628) F 2.00

1,304,000 2.00
310,000
338,000
248,000
408,000

Available 20.00
Maximum 20.00