MASTER MINDS No.1 for CA/CWA & MEC/CEC 17. BUDGETARY CONTROL SOLUTIONS TO ASSIGNMENT PROBLEMS Problem No. 1 a. Calculation of selling price per unit & Number of Units: Particulars Direct Materials: P Q Direct Labour: Machine hours Assembly hours rd Over heads (1/3 of the direct labour) Total Cost th Add: Profit (1/4 of cost) Sales ∴ No. of Units proposed to be sold = Calculations Amount (3 x 6) 18 (1.50 x 4) 6 24 (7 x 4) 28 (2.50 x 3.20) 8 (36 x 1/3) 36 12 72 18 90 Sales value 1,26 ,00,000 = 1,40,000 Units. = Rs. 90 Selling price b. Statement showing Raw Material Budget: Particulars Raw Material – P Raw Material consumption P – 1,45,000 x 3.00 (W.N – 1) Q – 1,45,000 x 1.50 Raw Material – Q 4,35,000 2,17,500 Add: Closing Stock of Raw Material 30,000 66,000 Less: Opening Stock of Raw Material 54,000 33,000 4,11,000 2,50,500 Raw Material purchased Raw Material rate per unit Raw Material cost 6 4 24,66,000 10,02,000 W.N – 1: Production / Consumption = Sales + Closing Stock – Opening Stock = 1,40,000 + 25,000 – 20,000 = 1,45,000 units c. Calculation of available hours: Particulars Available hours to each worker Less: Idle time (96 + 80 + 64) Productive hours per worker per annum Total available hours in machine shop (600 x 1,840) Total hours available in Assembly shop Total hours available for company No. of hours 2,080 240 1,840 1,10,4,000 3,31,200 14,35,200 Calculation of utilized hours: Particulars Machine shop (1,45,000 × 7hrs) Assembly shop (1,45,000 × 25hrs) Total utilized hours No. of hours 10,15,000 3,62,500 13,77,500 IPCC_32e_Costing_Budgetary Control_Assignment Solutions_____________101 Ph: 0863 – 22 42 355 www.gntmasterminds.com 10,15,000 x 100 = 91. 94% 11,04,000 3,62,500 x 100 =109% Assembly shop utilization = 3,31,200 Machine shop utilization = 13,77,500 Total capacity utilization = Copy Rights Reserved To MASTER MINDS, Guntur x 100 = 95. 98% 14,35,200 Comments: 1. In the Machine shop, utilization ratio is nearly 92% i.e, 8% is treated as normal idle time or normal loss. 2. In the Assembly shop, utilization ratio is nearly 109% i.e, overtime, it is a good sign to the company. 3. In case of overall company, utilization ratio is 96% i.e, 4% is treated as normal loss. Problem No. 2 (i) Production Budget for the year 2012 by Quarters I Sales demand(Unit) II III IV Total 18000 22000 25000 27000 92000 I Opening Stock 6000 7200 8100 8700 30000 II 70% of Current Quarter ‘s Demand 12600 15400 17500 18900 64400 III 30% of Following Quarter’s Demand 6600 7500 8100 7400* 29600 IV Total Production(II &III) 19200 22900 25600 26300 94000 V Closing Stock (I+IVSales) 7200 8100 8700 8000 32000 *Balancing Figure (ii) Break Even Point = Fixed Cost/ PV Ratio = 220000/13.75% = 1600000 or 40000 units. P/V Ratio = (40 - 34.50 = 5.50)/40 × 100 =13.75% (Or, Break Even Point= Fixed Cost/ Contribution = 2,20,000/5.50 = 40,000 Units) Total sales in the quarter II is 40000 equal to BEP means BEP achieved in II quarter. Problem No. 3 a. Production bedjet showing month wise number of units to be manufactured: Gamma: Sales Add: closing stock Less: closing stock production Apr 900 550 450 1000 May 1100 700 550 1250 June 1400 900 700 1600 July 1800 1100 900 2000 Aug 2200 1100 1100 2200 Sep 2200 900 1100 2000 Total 10050 IPCC_32e_Costing_Budgetary Control_Assignment Solutions ____________102 MASTER MINDS No.1 for CA/CWA & MEC/CEC Delta: Apr 2900 1450 1450 2900 Sales Add: closing stock Less: closing stock production May 2900 1250 1450 2700 June 2500 1050 1250 2300 July 2100 850 1050 1900 Aug 1700 850 850 1700 Sep 1700 950 850 1800 Total 13300 b. Production cost budget for the half year: Gamma Direct material Direct labour Moh Delta 50 20  2,00,000    20,000   3,75,000    25,000  15  10  Cost per unit Production Production cost Total 80 30 80 10,050 8,04,000 125 13,300 16,62,500 24,66,500 Problem No. 4 (i) Production Budget for January to March 2009 (Quantitative): Budgeted Sales Add: Budgeted Closing Stock (20% of sales of next month) Less: Opening Stock Budgeted Output Jan 10,000 Feb 12,000 Mar 14,000 April 15,000 2,400 12,400 2,700 9,700 2,800 14,800 2,400 12,400 3,000 17,000 2,800 14,200 3,000 18,000 3,000 15,000 Total Budgeted Output for the Quarter ended March 31, 2009 = (9,700 + 12,400 + 14,200) = 36,300 units. (ii) Raw Material Consumption Budget (in quantity): Month Jan Feb Mar Apr Total Budgeted Output (Units) 9,700 12,400 14,200 15,000 Material ‘X’ @ 4 kg per unit (Kg) 38,800 49,600 56,800 60,000 2,05,200 Material ‘Y’ @ 6 kg per unit (Kg) 58,200 74,400 85,200 90,000 3,07,800 (iii) Raw Materials Purchase Budget (in quantity) for the Quarter ended (March 31,2009): Raw material required for production Add: Closing Stock of raw material Less: Opening Stock of raw material Material to be purchased Material X (kg) 1,45,200 30,000 1,75,200 19,000 1,56,200 Material Y (kg) 2,17,800 45,000 2,62,800 29,000 2,33,800 IPCC_32e_Costing_Budgetary Control_Assignment Solutions_____________103 Ph: 0863 – 22 42 355 www.gntmasterminds.com Problem No. 5 Flexible budget at 70% capacity: Particulars Variable cost: Material Labour FOH AOH Per unit 70% capacity(7000 units) 500 X 102% = 510 150 90 50 800 Total Fixed cost: FOH AOH Total(A) Sales(B) Profit(B-A) 56,00,000 5,000 units X 60 5,000 units X 50 3,00,000 2,50,000 61,50,000 68,60,000 7,10,000 7,000 units X (1,000-2%) Problem No. 6 Head of Account Budgeted hours Variable expenses Semi-variable expenses Fixed expenses Total expenses Recovery rate per hour Control basis V SV F 70% 7,000 1,260 1,200 1,800 4,260 0.61 80% 8,000 1,440 1,200 1,800 4,440 0.55 90% 9,000 1,620 1,320 1,800 4,740 0.53 100% 10,000 1,800 1,440 1,800 5,040 0.50 We notice that the recovery rate at 70% activity is Rs. 0.61 per hour. If in a particular month the Factory works 8,000 hours, it will be incorrect to estimate the allowance as Rs. 4,880 @ Rs. 0.61. The correct allowance will be Rs. 4,440 as shown in the table. If the actual expenses are Rs. 4,500 for this level of activity, the company has not saved any money but has over-spent by Rs. 60 (Rs. 4,500 – Rs. 4,440). THE END IPCC_32e_Costing_Budgetary Control_Assignment Solutions ____________104