Hi Tejas,
as the name & question suggests, batch setup costs vary on the basis of number of batches.
so we need to find budgeted cost per batch using info from the budget of August.
budgeted cost per batch= Total setup costs / number of batches
= (cost/unit * budgeted production) /
5 batches = (4 * 220,000) / 5
= 176,000 per batch
An average batch produces max 50,000 units. So, 220,000 units will require (220,000 / 50,000) = 4.4
which means minimum 5 batches are inevitable for a production of 220,000 units.
on similar lines, for Sept , it will require (260,000/50,000) = 5.2 i.e 6 batches
Note - Those figures of 42,000 - 45,000 - 50,000 units are of
actual batch sizes
for Aug, hence are not relevant & are given only to confuse us.
I Hope this helps
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Chirag Patel
India
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Original Message:
Sent: 06-23-2021 04:55 AM
From: Tejas Doke
Subject: Budgeted production costs
Can anyone please help me to understand the calculation of batch setup cost?
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Tejas Doke
Accountant
Dombivli MH
India
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