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```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
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 =
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To
MASTER MINDS, Guntur
x 100 = 95. 98%
14,35,200
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
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
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
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
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
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