Belicious Bakery (BB) manufactures variety types of cakes, and currently holds the biggest market share of bakery product in country M. Its manufacturing facility is located at town X. Using a centralized manufacturing system, BB will deliver its products to the retailers around the country M every fortnight. BB has used high-low method in classifying its cost. Given below are the costs associated with BB’s manufacturing activity during the month of February. BB uses machine hour as the cost driver. The highest activity in February consumes 450 machine hour, while the lowest consumes 20% less than the highest activity. Cost
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Belicious Bakery (BB) manufactures variety types of cakes, and currently holds the biggest market share of bakery product in country M. Its manufacturing facility is located at town X. Using a centralized manufacturing system, BB will deliver its products to the retailers around the country M every fortnight.
BB has used high-low method in classifying its cost. Given below are the costs associated with BB’s manufacturing activity during the month of February. BB uses machine hour as the cost driver. The highest activity in February consumes 450 machine hour, while the lowest consumes 20% less than the highest activity.
Cost Total Cost (RM)
Machine
High 36,000
Low 36,000
Raw material
High 24,750
Low 19,800
Maintenance cost
High 12,000
Low 10,200
REQUIRED:
a) Determine the cost formula for:
Machine depreciation
Raw material
Maintenance cost
b) Based on your answer in (a), identify the behavior of each cost. Justify your answer.
c) Predict the total cost at the activity level of 420 machine hours.
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