Question 1

Esko Ltd produced its budget for a recent period as follows:

Production units 20,000 22,000 24,000

Material $30,000 $33,000 $36,000

Wages $25,000 $27,500 $30,000

Depreciation $8,000 $8,000 $8,000

Power $17,000 $18,000 $19,000

Transport $16,000 $17,500 $19,000

Maintenance $18,000 $19,000 $20,000

The actual production during the period was 23,500 units.

You are required to

(a) do a budget for the actual activity level for the period. (9 marks)

(b) If the actual costs for the period were

Materials $34,000

Wages $33,000

Depreciation $8,000

Power $17,800

Transport $17,600

Maintenance $19,900

Calculate the variances from the budgeted figures calculated in (a) above.

(12 marks)

(c) Calculate a budgeted rate per unit based on both 20,000 and 24,000 units, and

state why there may be a difference in the two rates. (4 marks)

(Total 25 marks)