Mixed costs can be separated into their fixed and variable elements by using records of costs from previous periods - Leaving Cert Accounting - Question b - 2008

For other overhead costs, we will calculate in a similar manner:

Given:

• At a high production output of 18,000 units, total other overhead costs = €99,000.
• At a low output of 10,000 units, total other overhead costs = €57,000.

The total cost difference:

e.g. 99,000 - 57,000 = €42,000

difference in units is:

e.g. 18,000 - 10,000 = 8,000

The variable cost per unit is:

ext{Variable cost per unit} = rac{42,000}{8,000} = 5.25

Calculating total variable other overhead costs:

For 10,000 units:

• Variable Other Overheads = $10,000 imes 5.25 = 52,500$
• Fixed Other Overheads = Total Other Overheads - Variable Overheads = 57,000 - 52,500 = €4,500

Thus:

• Variable Component: €52,500
• Fixed Component: €4,500.

To create a flexible budget for an output of 95% activity level (17,100 units), we will compute:

Sales Calculation: Assuming the sales price per unit is constant:

$ext{Sales} = 17,100 imes ext{(Sale Price)}$

We have: Sales = €785,000 (assuming the appropriate price per unit is applied from previous data).

Variable Costs:

• Direct Materials: $= €266,000$ (calculated from cost per unit)
• Direct Labour: $= €144,000$ (similar)
• Production Overheads: $= €112,900$ (assuming proportionate variable costs)
• Other Overhead Costs: $= 17,100 imes 5.25 = €90,750$

Total Variable Costs: $631,750 = €785,000 - (total variable costs)$

Contribution Margin: $ext{Contribution} = ext{Sales} - ext{Total Variable Costs}$

Final breakdown:

• Less Fixed Costs: €35,500
• Profit = €117,770 (to fulfill the budgeted profit of 15%)

Final Budget displays Sales, Variable Costs, and Contribution clearly.