Appex company can produce 4,000 units of a product at 100% capacity. Following i

Question

Appex company can produce 4,000 units of a product at 100% capacity. Following information is abailable from its records:

Direct Material cost $1 per unit

Direct wage cost $4 per hour

Rate of the prodcution per hour is 10 units

You are required to compute the cost of the production at 100%, 80% and 60% capacity level showing variable, semi variable and fixed items under flexible budget

Units produced 2800 3600 power 1800 2000 repair and maintenance 500 560 indirect labor 700 900 consumable stores 1400 1800 inspection 200 240 depreciation 1400 1400 salary 1000 1000

Explanation / Answer

Power =
Variable cost = (2000 - 1800) / (3600-2800) = 0.25
Fixed cost = 1800 - 2800*.25 = 1100

Repair and maintenance =
Variable Cost = (560 - 500) / (3600 - 2800) = 0.075
Fixed cost = 500 - 2800 * 0.075 = 290

Inspection =
Variable cost = (240 - 200) / (3600 - 2800) = 0.05
Fixed cost = 200 - 2800 * 0.05 = 60

Total variable cost = Direct material ($1) + Direct wage cost ($4/10) + Power + Repair and maintenance + indirect labor + Consumables + inspection
= 1 + 0.4 + 0.25 + 0.075 + 0.05
= 1.775
Total fixed cost = Power + Repair and maintenance + inspection + Depreciation + salary
= 1100+ 290 + 60 + 1400 +1000
= 3850

Cost of production at 100% = Units * Variable cost + Fixed cost
= 4000 units * 1.775 + 3850
= 10,950

Cost of production at 80% = Units * Variable cost + Fixed cost
= 3200 units * 1.775 + 3850
= 9530

Cost of production at 60% = Units * Variable cost + Fixed cost
= 2400 units * 1.775 + 3850
= 8110

Units produced 2800 3600 power 1800 2000 Semi-variable repair and maintenance 500 560 Semi-variable indirect labor 700 900 Variable consumable stores 1400 1800 Variable inspection 200 240 Semi-Variable depreciation 1400 1400 Fixed salary 1000 1000 Fixed

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.