SUGGESTED SOLUTION
REQUIRED PART 1
ACTUAL PROFIT FOR THE YEAR ENDED 28 FEBUARY 2014
NO OF UNITS PRODUCED AND SOLD
5 900 units
REVENUE Sales
(given)
R 1 829 000
VARIABLE COSTS R 1 368 310
Wood expense (N1)) R 1 158 200
Casual labour (given) R 105 600
VMO
Sales co...
VARIABLE COSTS R 1 368 310
Wood expense (N1)) R 1 158 200
Casual labour (given) R 105 600
VMO (N2) R 31 350
Sales commission (given) R 73 160
CONTRIBUTION R 460 690
FIXED COSTS R 40 250
Supervisor (given) R 35 000
FMO (N8) 5 250
NET PROFIT R 420 440
N1- Wood expense
Wood purchased R 1 258 200
Less: Closing stock at standard cost R100/metres x 1000 metres R 100 000
R 1 158 200
N2 - To determine the budgeted variable cost portion and the budgeted fixed cost portion,
the high low method must be used
(Highest cost - Lowest cost) / (Highest quantity of cost driver - Lowest quantity of cost driver) = m
Highest and Lowest costs are given at R 41 000 and R 32 000.
Highest quantity = 12 000 hours. Lowest quantity = 9 000 hours
(R 41 000 - R 32 000) / (12 000 – 9 000) = m = R 3 per hour
y = mx + c, therefore c = y – mx
x = 12 000, m = 3 , y = R 41 000
Budgeted fixed cost portion: R 41000 - (R 3 x 12 000) = R 5 000 OR
x = 9 000, m = 3, y = R 32 000
1
, Budgeted fixed cost portion: R 32 000 - (R 3 x 9 000) = R5000
Actual FMO =R 5 000 x 1.05 = R5 250
Actual VMO =9 500 hours x R3 x 1.1= R31 350
Actual total MO R36 600
REQUIRED PART 2
STATIC AND FLEXED BUDGETS FOR THE YEAR ENDED 28 FEBUARY 2014
NO OF UNITS PRODUCED AND SOLD 6000 units 5 900 units
REVENUE Sales (N1) (N2) R 1 800 000 R 1 770 000
VARIABLE COSTS R 1 425 000 R 1 401 250
Wood (N3) (N4) R 1 200 000 R 1 180 000
Casual labour (N5) (N6) R 108 000 R 106 200
VMO (N8) R27 000 R 26 550
Sales commission (N9) R 90 000 R 88 500
CONTRIBUTION R 375 000 R 368 750
FIXED COSTS R 41 000 R 41 000
Supervisor (N7) R 36 000 R 36 000
FMO (N8) 5 000 5 000
NET PROFIT R 334 000 R 327 750
N1 - Budgeted price per chairs x budgeted number of chairs made and sold
R300 x 6000 chairs = R 1 800 000
N2 - Budgeted price per chairs x actual number of chairs made and sold
R300 x 5 900 chairs = R 1 770 000
N3- Budgeted price of wood per chairs x budgeted number of chairs made and sold
R100/metres x .2 metres x 6 000 chairs = R 12 000 000
N4- Budgeted price of wood per chairs x actual number of chairs made and sold
R100/metres x 2 metres x 5 900 chairs = R 1 180 000
N5- Budgeted wage rate x number of hours per chair x budgeted number of chairs made and sold
R12/hour x 1.5hours x 6 000 chairs = R 108 000
2
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller docguru. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.19. You're not tied to anything after your purchase.
