Solution of Problem No.

18-2

Level of Activitie
Particulars
Direct Labor hours

80%
40,000

Variable Expenses:
1 Shop supplies (0.10 per direct labor hours)
2 Indirect labor (0.45 per direct labor hours)
3 Payrol taxes &Fringe benefit (W-1)

4,000
18,000
57,240

4 Power and Light (W-2)

5 Inspection (W-3)
6 Other semi variable expenses (W-4)
TOTAL VARIABLE EXPENSES

1,200
4,800
5,600
90,840

Fixed Expenses:
1 Depreciation Expenses
2 Insurance
3 Maintenance Cost
4 Property tax
5 Supervision Staff

9,000
1,500
24,000
1,500
36,000

6 Power and Light (W-2)

7 Inspection (W-3)
8 Other semi variable expenses (W-4)
TOTAL FIXED EXPENSES
TOTAL FACTORY OVERHEAD

200
4,200
1,900
78,300
169,140

WORKINGS
W-1

Calculation of Payrol taxes & fringe benefit

Amount of Direct Labor Cost = 50,000 hours x 7.50
Amount of Indirect Labor Cost = 50,000 hours x 0.45

375,000
22,500

Total amount of Payrol

397,500

Amount of tax (Rs. 397,500 x 18%)

W-2

71,550

CALCULATION OF POWER & LIGHT

Hours
High Value
Low Value

50,000
40,000
10,000

Difference in Value
Variable per hour cost = Difference in Cost
Difference in hours

300
10,000

Variable Cost per hour

Total Amount of semi variable expenses
Less: Variable portion (50,000 hours x 0.03)
Fixed Portion

W- 3

0.03
1,700
(1,500)
200

CALCULATION OF INSPECTION:
Hours
High Value
Low Value

50,000
40,000
10,000

Difference in Value
Variable per unit cost = Difference in Cost
Difference in hours

1,200
10,000

Variable Cost per unit =

Total Amount of semi variable expenses
Less: Variable portion (50,000 hours x 0.12)
Fixed Portion

0.12
10,200
(6,000)
4,200

W- 4

CALCULATION OF OTHER SEMI VARIABLE EXPENSES

Hours
High Value
Low Value

50,000
40,000
10,000

Difference in Value
Variable per unit cost = Difference in Cost
Difference in hours

1,400
10,000

Variable Cost per unit =

Total Amount of semi variable expenses
Less: Variable portion (50,000 hours x 0.14)
Fixed Portion

0.14
8,900
(7,000)
1,900

Level of Activities
90%

100%

45,000

50,000

4,500
20,250
64,395

5,000
22,500
71,550

1,350
5,400
6,300
102,195

1,500
6,000
7,000
113,550

9,000
1,500
24,000
1,500
36,000

9,000
1,500
24,000
1,500
36,000

200
4,200
1,900

200
4,200
1,900

78,300

78,300

180,495

191,850

Cost
1,700
1,400
300

Cost
10,200
9,000
1,200

Cost
8,900
7,500
1,400

Solution of Exercise No 4
60% Level
2,280

75%Level
2,850

100% level
3,800

1,920

2,400

3,200

Direct Material
Direct Labour
Fixed factory overhead
Supplies (0.23/hour)
Indirect Labour (1/8 of D/L)
Other Charges (0.18 / hour)

2,856
17,280
670
442
2,160
346

3,570
21,600
670
552
2,700
432

4,760
28,800
670
736
3,600
576

Total Cost

23,753

29,524

39,142

Units produced
Direct Labour hours

20 workers x 8 hours x 20 days

Required No. 1:
Capacities
Direct Labour hours

Variable Cost
Utilities
Maintenance
Other Factory overhead
Indirect Labour

80%

90%

100%

110%

24,000

27,000

30,000

33,000

28,800
38,400
19,200
16,800

32,400
43,200
21,600
18,900

36,000
48,000
24,000
21,000

39,600
52,800
26,400
23,100

Total Variable Cost

103,200

116,100

129,000

141,900

Fixed Cost
Maintenance
Indirect Labour
Depreciation

40,000
130,000
90,000

40,000
130,000
90,000

40,000
130,000
90,000

40,000
130,000
90,000

Total Fixed Cost

260,000

260,000

260,000

260,000

Total Factory Overhead Cost

363,200

376,100

389,000

401,900

Required No. 2 Comparative Performance Report

Capacities
Direct Labour hours

Variable Cost
Utilities
Maintenance
Other Factory overhead
Indirect Labour

80%

Actual

Variance

24,000

24,000

Nil

28,800
38,400
19,200
16,800

24,200
38,100
8,400
19,600

4,600 U
300 F
10,800 U
(2,800) U

Total Variable Cost

103,200

90,300

12,900 U

Fixed Cost
Maintenance
Indirect Labour
Depreciation

40,000
130,000
90,000

40,000
130,000
91,500

(1,500) F

Total Fixed Cost

260,000

261,500

(1,500)

Total Factory Overhead Cost

363,200

351,800

11,400 U