The following information has been extracted from Windhoek Manufacturers, a company that produces and sells cosmetics for the year ended 31 July 2022. REQUIRED: Marks Page 12 of 16 FACULTY OF COMMERCE, MANAGEMENT AND LAW

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Solution:

Calculation of variable cost/unit and fixed cost in total.

Variable cost varies/unit and fixed xost always remain same if not specifically mentioned in the question.

Calculation of variable cost/unit and fixed cost as per static budget of 30000 & 20000 units:

ParticularsVariable Cost /unit ($)Fixed cost ($)
Material(600,000-470,000)/(30,000-20,000) = 13/unit470,000-(20,000*13) = 210,000
Labour(450,000-300,000)/(30,000-20,000) = 15/unit300,000-(20,000*15) = 0
Factory Overhead(240,000-190,000)/(30,000-20,000) = 5/unit190,000-(20,000*5) = 90,000
Seling & Distributions(120,000-90,000)/(30,000-20,000) = 3/unit90,000-(20,000*3) = 30,000
Administrative Expenses(200,000-200,000)/(30,000-20,000) = 0All are fixed so 200,000

Calculation of flexible budget for 40000 units:

Revenue per unit will always remain same if it is not soecifically mentioned in the Question.

Revenue / unit = Total revenue / Total units sold

= 180000/30000 = $60/unit (for 30000 units)

Statement showing flexible budget for 40000 units

ParticularsAmount ($)
Revenue (40000*60)24,00,000
Cost of Sales (variable):
Material (40000*13)-520,000
Labour (40000*15)-600,000
Factory Overhead (40000*5)-200,000
Period Costs (variable):
Selling & Distributions (40000*3)-120,000
Contribution Margin960,000
Cost of Sales (Fixed):
Material-210,000
Factory Overhead-90,000
Period Costs (Fixed):
Selling & Distributions-30,000
Administrative Expenses-200,000
Operating income430,000

Gross profit= Revenue – Cost of sales(Variable and fixed)

= 24,00,000 – 520,000 – 600,000 – 200,000 – 210,000 – 90,000

= $ 780,000