Question $2$Question $4$

Alter Ltd prepared a production cost budget based on the production of $64,000$ units of

product. The total production budget capacity of the firm is $80,000$ units of product.

Assume all costs to be variable unless otherwise stated.

Actual production for the period was $68,000$ units. The actual costs were:

Required:

$($a$)$ Prepare a flexible budget for both $75\%$ and $85\%$ utilization of production capacity.

$(8$ marks$)$

$($b$)$ Compare actual total costs for the period with a flexed budget and calculate variances.

$(4$ marks$)$

Bridges Co wishes to estimate the unit cost of a proposed new product. The following

information has been collected.

Estimated direct costs $($all variable$)$:

Direct material $,4kg$ per unit at $$5\mathrm{.}00$ per $kg$

Direct labour $,0\mathrm{.}5$ hour per unit at $$10\mathrm{.}00$ per hour

Other direct expenses $,$$$2\mathrm{.}00$ per unit

A fixed overhead absorption rate based on budgeted direct labour hours is used to cost

products.

Fixed overheads are budgeted at $$60,000$ for the next period with a budgeted activity

level of $6,000$ direct labour hours.

Bridges Co is considering using activity based costing and the cost accountant has

collected the following information on activities and costs associated with the proposed

new product.