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Good morning sir,
Please can you help answer this question. Thank you sir.
ABC Co has a manufacturing capacity of 10,000 units. The flexed production cost budget of the company is as follows:
Capacity Total production costs
60% $11,280
100% $15,120
What is the budgeted total production cost if the company operates at 85% capacity?
We use the normal high-low method.
At 60% they produce 6,000 units and the cost is $11,280
At 100%, they produce 10,000 units and the cost is $15,120There the variable cost is (15,120 – 11,280) / (10,000 – 6,000) = $0.96 per unit,
and the fixed cost is 11,280 – (6,000 x 0.96) = $5,520.You should have no problem calculating the cost of 8,500 units.
Do watch my free lecture on this. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
Thank you very much sir for your prompt response. I really appreciate your explanation, please i also cannot solve this, I have subtracted the favourable and added the adverse. I also did the reverse but can’t get the answer.
A company has recorded the following variances for a period:
Sales volume variance $10,000 adverse
Sales price variance $5,000 favourable
Total cost variance $12,000 adverseStandard profit on actual sales for the period was $120,000.
What was the fixed budget profit for the period?Thank you sir
In future please start a new thread when you are asking about a different topic.
The only difference between the standard profit on actual sales and the original budget profit is the sakes volume variance. Since the sales volume variance is 10,000 adverse, the original budget profit must have been 10,000 more than the standard profit on the actual sales.
Have you watched my free lectures on variances?
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