PROBLEM 1

a.

Variable cost per unit = Total variable costs/ Total units produced

VCPU for x = $420,000/20,000

= $21
VCPU for y = $555,000/30,000
=$18.5
b.

In my view low level management of MT are involved directly in business and it has idea about
what are required to operate for business it calculates budget by plan and schedule of each
department and sums up at final so, based on assumption but budget x is practical so it has

c.

high costs and low sales forecast.

Middle level management are setting total budget and breaking them and allocating them to
each department. Also as an investor senior level determines high sales target minimizing the

d.

cost
Middle level management are the investor and low level management are the staff who are
directly involved in day to day business activities, they have idea about handling business. are
incomplete without one another. So both party should come on agreement to maximize the
profit minimizing expenses.

PROBLEM 2
a.

Sales Budget for 1st quarter for WJ Company

No of units
Price per

July
35,000
$85

August
20,000
$85

September
15,000
$85

Total
70,000
$85

October
8,000
$85

November
6,000
$85

unit
Total Sales

$2,975,000

$1,700,000

$1,275,000

$5,950,000

$680,000

$510,000

Total
70,000

October
8,000

November
6,000

Revenue

b.

Sales in

Production Budget for 1st quarter for WJ Company

July
35,000

August
20,000

September
15,000

Unit
Add:

16,000

12,000

6,400

34,400

4,800

sale)
Total Units

51,000

32,000

21,400

104,400

12,800

required
Less:

28,000

16,000

12,000

56,000

6,400

23,000

16,000

9,400

48,400

6,400

Desired
Inventory
(80% of
following
months

Opening
Inventory
Total
Number of
Units to
produce

c.

Direct Material Budget for 1st quarter for WJ Company

Total Number of Units

July
23,000

August
16,000

September
9,400

Total
48,400

October
6,400

to produce
Polyester used per unit

(in meters)
Total Polyester used

115,000

80,000

47,000

242,000

32,000

(in meters)

Add: Desired Ending

8,000

4,700

3,200

15,900

(17,000)

(8,000)

(4,700)

(29,700)

the month of July)

Total polyester need to

106,000

76,700

45,500

228,200

purchase (in meters)

Cost of Polyester per

$8

$8

$8

$8

$8

meter
Total Cost of Polyester
Lining materials used

848,000
3

613,600
3

364,000
3

182560
3

per unit (in meters)

Total Polyester used

69,000

48,000

28,200

145,200

19,200

(in meters)
Add: Desired Ending

4,800

2,820

3,200

1,920

(10,200)

(4,800)

(2,820)

(17,820)

63,600

46,020

27,300

136,920

meters)
Cost of lining (per

$2

$2

$2

$2

meter)
Total Cost of linen

127,200

92,040

54,600

273,920

Inventory (10% of
following months
production need)
Less: Opening
Inventory (Given for

Inventory (10% of
following months
production need)
Less: Opening
Inventory (Given for
the month of July)
Total lining materials
need to purchase (in

d.

Direct Labor Budget 1st quarter for WJ Company

July
23,000

August
16,000

September
9,400

Total
48,400

October
6,400

$2

$2

$2

$2

$2

unit
Total no. of

46,000

32,000

18,800

96,800

12,800

hours
Labor

$15

$15

$15

$15

$15

690,000

480,000

282,000

1,452,000

192,000

Total
Number

of

Units

to

produce
Direct labor
cost

per

per

hour
Direct Labor

cost

e.

Overhead Budget for 1st quarter for WJ Company

Fixed Overheads
Fixed

July

August

September

Total

Overhead
Fixed shop

3,000

3,000

3,000

9,000

e overhead
Fixed

4,000

4,000

4,000

12,000

supervision
Depreciation
Tax
Others
Total Fixed

60,000
5,000
10,000
82,000

60,000
5,000
10,000
82,000

60,000
5,000
10,000
82,000

180,000
15,000
30,000
246,000

maintenanc

Overhead

Variable Overheads
Variable

July

August

September

Total

Overhead
Factory

$46,000

$32,000

$18,800

$96,800

$34,500

$24,000

$14,100

$72,600

$23,000

$16,000

$9,400

$48,400

$92,000

$64,000

$37,600

$193,600

$195,000

$136,000

$79,900

$410,000

supplies ($1 x
hours)
Energy
Supplies
($0.75

hours)
Shop
Maintenance
($

0.5

hours)
Other
Variable ($2x
hours)
Total Variable

Overhead
Total

$277,500

$218,000

$161,900

$656,000

Manufacturin
g overhead

f.
Selling

Selling general and administration expenses

and

July

August

September

Total

18,000
22,000
10,000
105,000
26,250
52,500

18,000
22,000
10,000
60,000
15,000
30,000

18,000
22,000
10,000
45,000
11,250
22,500

54,000
66,000
30,000
210,000
52,500
57,500

General
expenses
Fixed Salaries
Depreciation
Other
Commission
Shipping
Other

PROBLEM 3
a.

Standard direct material cost per tractor tyre

= standard material quantity x price of standard material
= 15 kgs x $3.50
= $52.50

b. Some advantages of implementing a standard cost system are listed as:

1. It requires less resource and easily be implemented
2. It formulates production policy by determining price, which helps making
estimation for product planning and processing.
3. It helps to find relation between price and usage to overcome wastage.
c.
1- Purchasing Power - find purchasing power by determined price
2- Mixing department supervisor supervise the mixing department
3- Moulding department supervisor supervise moulding department and
maintain standard
4- Cost accountant look after accounting part according to standard cost
5- Product engineer designing product
d.
Material price variance = (AP x AQ) (SP x AQ)

=AQ (AP SP)

Where,
AP= Actual Price

= $3.44

AQ= Actual Quantity

=75,000

SP= Standard Price =$3.5

= 75,000(3.44-3.5)
=$4500 favorable
Direct labor rate variance = AH (AR-SR)
Where,
AH= Actual Hour

=3220

AR= Actual Rate

=9.65

SR= Standard Rate =10

= 3220 (9.65- 10)
= ($1127) unfavorable
Labor Efficiency variance = SR (AH-SH)
Where,
SR= Standard Rate =10
AH= Actual Hour

=3220

SH= Standard Hour

= 0.75 x 4500
=10(3220-3375)
= ($1,550) unfavorable

Submitted by:

=3,375

Anil Shahi
Student id: s285516
Subject: Accounting for Managers (PRBA007)
Charles Darwin Melbourne Campus