Solution of Problem No.

18-2

Level of Activiti
Particulars 80%

Direct Labor hours 40,000

Variable Expenses:
1 Shop supplies (0.10 per direct labor hours) 4,000
2 Indirect labor (0.45 per direct labor hours) 18,000
3 Payrol taxes &Fringe benefit (W-1) 57,240

4 Power and Light (W-2) 1,200

5 Inspection (W-3) 4,800
6 Other semi variable expenses (W-4) 5,600
TOTAL VARIABLE EXPENSES 90,840

Fixed Expenses:
1 Depreciation Expenses 9,000
2 Insurance 1,500
3 Maintenance Cost 24,000
4 Property tax 1,500
5 Supervision Staff 36,000

6 Power and Light (W-2) 200

7 Inspection (W-3) 4,200
8 Other semi variable expenses (W-4) 1,900

TOTAL FIXED EXPENSES 78,300

TOTAL FACTORY OVERHEAD 169,140

WORKINGS

W-1 Calculation of Payrol taxes & fringe benefit

Amount of Direct Labor Cost = 50,000 hours x 7.50 375,000

Amount of Indirect Labor Cost = 50,000 hours x 0.45 22,500
 Total amount of Payrol 397,500

Amount of tax (Rs. 397,500 x 18%) 71,550

W-2 CALCULATION OF POWER & LIGHT

Hours

High Value 50,000

Low Value 40,000
Difference in Value 10,000

Variable per hour cost = Difference in Cost 300

Difference in hours 10,000

Variable Cost per hour 0.03

Total Amount of semi variable expenses = 1,700

Less: Variable portion (50,000 hours x 0.03) (1,500)
Fixed Portion 200

W- 3 CALCULATION OF INSPECTION:

Hours

High Value 50,000

Low Value 40,000
Difference in Value 10,000

Variable per unit cost = Difference in Cost 1,200

Difference in hours 10,000

Variable Cost per unit = 0.12

Total Amount of semi variable expenses = 10,200

Less: Variable portion (50,000 hours x 0.12) (6,000)
Fixed Portion 4,200
W- 4 CALCULATION OF OTHER SEMI VARIABLE EXPENSES

Hours

High Value 50,000

Low Value 40,000
Difference in Value 10,000

Variable per unit cost = Difference in Cost 1,400

Difference in hours 10,000

Variable Cost per unit = 0.14

Total Amount of semi variable expenses = 8,900

Less: Variable portion (50,000 hours x 0.14) (7,000)
Fixed Portion 1,900
Level of Activities
90% 100%

45,000 50,000

4,500 5,000
20,250 22,500
64,395 71,550

1,350 1,500
5,400 6,000
6,300 7,000
102,195 113,550

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

200 200
4,200 4,200
1,900 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 75%Level 100% level
Units produced 2,280 2,850 3,800

Direct Labour hours 1,920 2,400 3,200

Direct Material 2,856 3,570 4,760

Direct Labour 17,280 21,600 28,800
Fixed factory overhead 670 670 670
Supplies (0.23/hour) 442 552 736
Indirect Labour (1/8 of D/L) 2,160 2,700 3,600
Other Charges (0.18 / hour) 346 432 576

Total Cost 23,753 29,524 39,142

20 workers x 8 hours x 20 days
Required No. 1:

Capacities 80% 90% 100% 110%

Direct Labour hours 24,000 27,000 30,000 33,000

Variable Cost
Utilities 28,800 32,400 36,000 39,600
Maintenance 38,400 43,200 48,000 52,800
Other Factory overhead 19,200 21,600 24,000 26,400
Indirect Labour 16,800 18,900 21,000 23,100

Total Variable Cost 103,200 116,100 129,000 141,900

Fixed Cost
Maintenance 40,000 40,000 40,000 40,000
Indirect Labour 130,000 130,000 130,000 130,000
Depreciation 90,000 90,000 90,000 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 80% Actual Variance

Direct Labour hours 24,000 24,000 Nil

Variable Cost
Utilities 28,800 24,200 4,600 U
Maintenance 38,400 38,100 300 F
Other Factory overhead 19,200 8,400 10,800 U
Indirect Labour 16,800 19,600 (2,800) U

Total Variable Cost 103,200 90,300 12,900 U

Fixed Cost
Maintenance 40,000 40,000 -
Indirect Labour 130,000 130,000 -
Depreciation 90,000 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