Atlas Motors Solution

Flexible budget contribution and profit statement

Sales Value W7 5589605.55

Direct material W1 1329999.3
Direct labour W2 2305332.12
Varible overhead W3 437506.44
Total varaible cost -4072837.8564
Contribution 1516767.6936
Fixed production OH w4 272609
Selling & distribution w5 162000
Admin ovehead W6 132000
Total fixed cost 566609
Profit W7 950158.694
 Working

75% capacity is 10000

100% capacity = 10000/.75 13333.3333
65% capacity = 13333.33*.65 8666.66667
85% capacity =13333.33*.85 11333.3333
Required 95% capacity = 13333.33*.95 12666.6667

W1 Direct material
1000000/10000=100
Allowance for future flexible increment 100*1.05= 105
For 12666.67 unit =12666.66*105 1329999.3

W2 Direct labour
1750000/10000=175
Allowance for future flexible increment 175*1.04= 182
for 12666.66 units=12666.66*182 2305332.12

W3 Varaible overhead
For varible overhead
(570000-527334)/(10000-8666.66) 31.99934
Allowance for future flexible increment 31.99*1.08= 34.5492
for 12666.66 units = 12666.66*34.54 437506.436

W4 Fixed production OH
570000-(10000*31.99)= 250100
Allowance for future flexible increment 250100*1.09 272609

W5 selling and distribution

150000 fixed
Allowance for future flexible increment 150000*1.08 162000

W6 Administrative overhead
120000 fixed
Allowance for future flexible increment 120000*1.10 132000

For selling price working W7

converting profit margin of 17% on sales to mark up on cost

markup to margin = margin%/(1-margin%) .17/(1-.17)= 0.204819277 20.48%

Total cost = variable cost + fixed cost 4072837.85+566609= 4639447
profit = total cost* markup % 4640047*.2048= 950158.7
Sales value =profit+fixed cost+varaible cost
950158.7+566609+4072837.85 5589605.55
566609