Good Day Sir
Please kindly help with the following:
60% 70% 80%
$ $ $
Direct materials 120 000 140 000 160 000
Direct labour 90 000 105 000 120 000
Production overhead 54 000 58 000 62 000
Other overhead 40 000 40 000 40 000
Total cost 304 000 343 000 382 000
What would be the total cost in a budget that is flexed at the 77% level of activity.
I'm not sure how they get:
Direct material cost per 1% activity=$2,000
Direct material cost per 1% activity=$1,500
Am sure after I understand this part, I will be able to tackle this question & 15.4 as well as they are similar
Thanks Sir
Zuzie
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Budgeting
11y ago#1If 60% activity has a materials cost os $120,000, then 1% activity must be $120,000 / 60 = $2,000.
Similarly for labour: if 60% costs $90,000 then 1% costs 90,000/60 = $1,500
For production overheads you are going to have to use the high/low approach (because they are part fixed and part variable).
Other overheads are fixed, so they are no problem.
Thank you Sir
I will try the question again
Regards,
Zuzie
11y ago#3You are welcome :-)
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