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Additional Flexible Budget Problem

The document presents a flexible budget for a company with a production target of 3,200 and 4,800 units at 50% and 75% capacity. It provides the fixed and variable costs at full capacity and asks to prepare the flexible budget at the two lower production levels, noting the effect on net profit

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148 views2 pages

Additional Flexible Budget Problem

The document presents a flexible budget for a company with a production target of 3,200 and 4,800 units at 50% and 75% capacity. It provides the fixed and variable costs at full capacity and asks to prepare the flexible budget at the two lower production levels, noting the effect on net profit

Uploaded by

aishwarya raikar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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M/s Anushree Enterprises is currently working at 50% capacity and produces 10000 units.

At 60% working raw material cost increases by 2% and selling price falls by 2%.
At 80% working raw material cost increases by 5% and selling price falls by 5%.
At 50% capacity working the product costs 18 per unit and is sold at 20 per unit. The unit cost
of 18 is made up as follows:
Material 10
Wages 3
Factory Overheads 3 (40% fixed)
Administrative Overheads 2 (50% fixed)
Prepare a statement showing the estimated profit of the business when it is operated at 60%
and 80% capacity. It may be noted the fixed overhead remain constant up to 100% capacity.
Increase in raw material cost and decrease in selling price are to be calculated with reference
to the figure given for 50% capacity usage.

The budgeted output of an industry specializing in the production of a one product at the
optimum capacity of 6,400 units per annum amounts to Rs. 1, 76,048 as detailed below:

Particulars Rs. Rs.

Fixed costs 20,688


Variable costs:
Power 1,440
Repairs 1,700
Miscellaneous 540
Direct material 49,280
Direct Labour 1,02,400 1,55,360
Total cost 1,76,048

The company decides to have a flexible budget with a production target of 3,200 and 4,800
units (the actual quantity proposed to be produced being left to a later date before
commencement of the budget period) Prepare a flexible budget for production levels of 50%
and 75%. Assuming, selling price per unit is maintained at Rs. 40 as at present; indicate the
effect on net profit.
Administrative, selling and distribution expenses continue at Rs.3, 600.

A department of Avon Company attains sales of Rs. 6, 00,000 at 80% of its normal capacity.
The expenses are given below:
Office salary 90000
General expenses 2% of sales
depreciation 7500
Rent and rates 8750
Selling cost:
salaries 8% of sales
Travelling expenses 2% of sales
Sales office 1% of sales
General expenses 1% of sales
Distribution cost:
wages 15000
rent 1% of sales
Other expenses 4% of sales
Draw a flexible Administrative, selling and distribution budget operating at 90% and 110% of
normal capacity.

The budget manager of Jupiter electrical is preparing flexible budget for the accounting year
starting from 1st July 2017.
The company produces one product. Direct material costs Rs. 7 per unit, direct labour averages
Rs. 2.50 per hour and requires 1.6 hours to produce one unit of product.
Salesmen are paid commission of Re. 1 per unit sold. Fixed selling and administration expenses
amount to Rs. 85000 per year.
Manufacturing overhead is estimated in the following amounts as under:

Volume of production in units 120000 150000


Indirect material 264000 330000
Indirect labour 150000 187500
Inspection 90000 112500
maintenance 84000 102000
supervision 198000 234000
Depreciation of plant & equipment 90000 90000
Engineering services 94000 94000
Total manufacturing overhead 970000 1150000
Prepare a total cost of budget for 140000 units of production.

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