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
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