Page 166 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes (c) Semi-variable Overheads: Semi-variable overheads are also known as Semi-fixed
overheads. It is an overhead which is partly fixed and partly variable. There is hardly
any difference between these two terms. However, if the-fixed part of the item of
expense is more than the variable, it may be called Semi-fixed. Similarly, where
variable part is greater than the fixed part, it may be called semi-variable. Examples
of Semi-variable overheads are charges of telephone and electric. The following
figure shows the semi-variable overheads.

Figure 8.3: Semi-variable Overhead

Example: In a department of a factory, 2,000 units were produced and sold at a profit
of 20% on cost price. What price would you quote for the supply of 3,000 units of the same
type of product, if the rate of expenses remains unchanged and the same percentage of profit is
desired?

The record of expenses for 2,000 units is as follows:
`
Material 10,000
Labour 12,000
Factory Expenses

Fixed ` 5,000
Variable ` 2,000 7,000
Administrative and Selling Expenses
Fixed ` 2,000

Variable ` 1,000 3,000
Total Cost 32,000
Profit: 20% on Cost 6,400
Selling price 38,400
Solution:

Statement of Tender price for 3,000 Units
(iv) Controllability-wise Classification: On the basis of controllability, overheads may be
classified into two categories. They are:
(a) Controllable Overheads: Those overhead costs which can be controlled by managerial
influence fall under this category. All variable costs are controllable.

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