Question

J&M provide the following budgeted expenses for producing 10,000 units of a toy, the following are the budgeted expenses:

$ (Per Unit)

Direct material 30.00

Direct Labor 15.00

Variable overhead 12.50

Fixed overhead ($75,000) 7.50

Variable expenses (direct) 2.50

Selling expenses (10% fixed) 7.50

Administration expenses ($ 25000 rigid for all production levels) 2.50

Distribution expenses (20% fixed) 2.50

Total cost of sale per unit 80.00

Prepare a budget for production of 12000, 14000 & 16000 units showing distinctly marginal cost & total cost.

Answer 1

	Per Unit ($)	12000 units	14000 units	16000 units
Direct material	30	360000	420000	480000
Direct Labor	15	180000	210000	240000
Variable expenses	2.5	30000	35000	40000
Variable Overhead:			0	0
Variable overhead	12.5	150000	175000	200000
Variable Selling Exp	6.75	81000	94500	108000
Varable Distribution	2	24000	28000	32000
Marginal Cost	68.75	825000	962500	1100000
Fixed overhead		75000	75000	75000
Administration Overhead		25000	25000	25000
Selling Overhead (Workings 1)		7500	7500	7500
Distribution Overhead (Workings 2)		5000	5000	5000
Total Fixed Cost		112500	112500	112500
Total Cost		937500	1075000	1212500
Cost per unit		78.125	76.78571	75.78125
(1) Selling Expenses: Total for 10000 units is $ 75000. 10% of this i.e. $ 7500 is fixed & the balance of $ 67500 is variable. Hence, variable cost per unit is $ 6.75
(2) Distribution expenses: Total for 10000 units is $ 25000. 20% of this i.e. $ 5000 is fixed & the balance of $ 20000 is variable. Hence, variable cost per unit is $ 2
														Per Unit ($) 12000 units 14000 units 16000 units Direct material 30 360000 420000 480000 Direct Labor 15 180000 210000 240000 Variable expenses 2.5 30000 35000 40000 Variable Overhead: 0 0 Variable overhead 12.5 150000 175000 200000 Variable Selling Exp 6.75 81000 94500 108000 Varable Distribution 2 24000 28000 32000 Marginal Cost 68.75 825000 962500 1100000 Fixed overhead 75000 75000 75000 Administration Overhead 25000 25000 25000 Selling Overhead (Workings 1) 7500 7500 7500 Distribution Overhead (Workings 2) 5000 5000 5000 Total Fixed Cost 112500 112500 112500 Total Cost 937500 1075000 1212500 Cost per unit 78.125 76.78571 75.78125 (1) Selling Expenses: Total for 10000 units is $ 75000. 10% of this i.e. $ 7500 is fixed & the balance of $ 67500 is variable. Hence, variable cost per unit is $ 6.75 (2) Distribution expenses: ..