Question 4.3 Lemon Lime Ltd. forecast sales of 42,000 units and production of 40,000 units. Other budget information related to the company for the year included: Direct manufacturing labour $171,900 Variable manufacturing overhead 83,500 Direct materials 52,300 Variable selling expenses 23,000 Fixed administrative expenses 190,000 Fixed manufacturing overhead 240,000 The standard costs remained the same as in the previous year. Lemon Lime Ltd. is considering various cost bases. The company management require a 15% return on an investment of $2,500,000. The company wants this cost built into all cost base options. Required Compute the cost-plus price per unit using direct costing. Compute the cost-plus price per unit using absorption costing. Compute the cost-plus price per unit using the full product 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.
Question 4.3
Lemon Lime Ltd.
|
Direct manufacturing labour |
$171,900 |
|
Variable manufacturing |
83,500 |
|
Direct materials |
52,300 |
|
Variable selling expenses |
23,000 |
|
Fixed administrative expenses |
190,000 |
|
Fixed manufacturing overhead |
240,000 |
The
Lemon Lime Ltd. is considering various cost bases. The company management require a 15% return on an investment of $2,500,000. The company wants this cost built into all cost base options.
Required
- Compute the cost-plus price per unit using direct costing.
- Compute the cost-plus price per unit using absorption costing.
- Compute the cost-plus price per unit using the full product cost.
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