QUESTION 1 A. Omega Sdn. Bhd. produces a single product that requires a significant quantity of machine hours. This firm recently introduced flexible budgetary control system as an integral part of its corporate planning and its junior accounting staff has prepared the following budget for the month of April 2012: Capacity Machine hours 80% 40.000 100% 50,000 RM RM Utilities 43,000 51,000 Supplies 28,000 30,000 Indirect labour 16,000 20,000 Maintenance 34,000 46,000 Supervision 15.000 15.000 Total Manufacturing overhead cost 136,000 162.000 The firm assigns the manufacturing overhead costs to production on the basis of machine hours. During April 2012, the firm operated at 85% of machine hour capacity and the actual manufacturing overhead costs incurred during the month were as follows: Utilities Supplies Indirect labour Maintenance Supervision Total Manufacturing overhead cost RM 45,850 26,375 19,000 38,750 15.000 144.975 The maintenance costs are semi variable in nature and there is also a "step up" cost of RM 5,000 in the fixed element of this cost for volumes in excess of 40,000 machine hours. The actual fixed costs are remained as budgeted. The budgeted sales are 10,000 units (100% capacity level) but the actual sales have dropped to 8,500 units. The standard selling price is RM24 per unit but the actual selling price is decreased by 2.5% to increase market share. Required: a) Prepare a flexible budget of overhead cost for the month of April 2012 (segregate the cost into variable and fixed costs). Show all your workings. (8 marks) b) Prepare a reconciliation statement for (a) above. (5 marks) QUESTION 1 A. Omega Sdn. Bhd. produces a single product that requires a significant quantity of machine hours. This firm recently introduced flexible budgetary control system as an integral part of its corporate planning and its junior accounting staff has prepared the following budget for the month of April 2012: Capacity Machine hours 80% 40.000 100% 50,000 RM RM Utilities 43,000 51,000 Supplies 28,000 30,000 Indirect labour 16,000 20,000 Maintenance 34,000 46,000 Supervision 15.000 15.000 Total Manufacturing overhead cost 136,000 162.000 The firm assigns the manufacturing overhead costs to production on the basis of machine hours. During April 2012, the firm operated at 85% of machine hour capacity and the actual manufacturing overhead costs incurred during the month were as follows: Utilities Supplies Indirect labour Maintenance Supervision Total Manufacturing overhead cost RM 45,850 26,375 19,000 38,750 15.000 144.975 The maintenance costs are semi variable in nature and there is also a "step up" cost of RM 5,000 in the fixed element of this cost for volumes in excess of 40,000 machine hours. The actual fixed costs are remained as budgeted. The budgeted sales are 10,000 units (100% capacity level) but the actual sales have dropped to 8,500 units. The standard selling price is RM24 per unit but the actual selling price is decreased by 2.5% to increase market share. Required: a) Prepare a flexible budget of overhead cost for the month of April 2012 (segregate the cost into variable and fixed costs). Show all your workings. (8 marks) b) Prepare a reconciliation statement for (a) above
