BUDGETING

FLEXIBLE BUDGETING

Q1. The expenses budgeted for production of 10,000 units in a factory are furnished as
follows
Particulars Per unit
(Rs.)
Materials 70
Labour 25
Variable overheads 20
Fixed overheads ( Rs. 1,00,000) 10
Variable Expenses( Direct) 5
Selling expenses ( 10 % fixed) 13
Distribution expenses( 20 % fixed) 7
Administrative expenses( Rs. 50,000) ( 100 % fixed) 5
______

Total 155

Prepare a budget for production of 6,000 units, 8,000 units and 10,000 units showing variable
cost, fixed cost in amount and cost per unit at each level of production.

Q2. Draw up a flexible budget for overhead expenses on the basis of the following data and
determine the overhead rates at 70%, 80%, and 90% plant capacity.
Particulars Total ( Rs.)
At 80 %
capacity
Variable overheads:
Indirect labour 12,000
Stores including spares 4,000
Semi – variable overheads
Power ( 30 % Fixed , 70 % variable) 20,000
Repairs and maintenance ( 60 % fixed , 40 % variable) 2,000
Fixed overheads:
Depreciation
insurance 11,000
salaries 3,000
10,000
Total overheads ---------
62,000
----------
Estimated direct labour hours 1,24,000 hrs
Q3. The expenses budget for production of 20,000 units at 100% capacity in a factory are
given:

Particulars Rs.
Material 5,00,000
Labour 4,00,000
Factory overheads ( 20% variable) 3,00,000
Office and Administrative ( 30% variable) 2,50,000
Selling and distribution ( 40 % variable) 1,50,000
Prepare a flexible Budget at 70 % and 90 % capacity level.

Q4. A manufacturing company produces widgets. The company has the following budgeted
data for the production of 1,000 widgets:

 Direct materials: Rs. 5 per unit

 Direct labour: Rs.3 per unit
 Variable manufacturing overhead: Rs. 2 per unit
 Fixed manufacturing overhead: Rs. 1,000

Requirement: Prepare a flexible budget for 800, 1000 and 1200 units.

Q5. From the following data, prepare a flexible budget for production of 40,000 units and
75,000 units, distinctly showing variable cost and fixed cost as well as total cost. Also
indicate element wise cost per unit.

Budgeted output is 1, 00,000 units and budgeted cost per unit is as follows:

Direct Material 95
Direct labour 50
Production overheads (variable) 40
Production overhead (fixed) 5
Administration overhead (fixed) 5
Selling overhead (10% fixed) 10
Distribution overhead (20 % fixed) 15

Q6. ABC Company expects to produce 10,000 units of its product. The costs are estimated as
follows:

 Variable cost per unit: Rs. 5

 Fixed costs: Rs.20,000

Requirement: Prepare a flexible budget for 8,000, 10,000 and 12,000 units.
FUNCTIONAL BUDGETS

Q7. Prepare the sales budget from the following data:

Product January
X 1200 Units
Y 3600 Units
The sales areas A and B account for 60% and 40 % sale of product X and 30% and 70% sale
of product Y respectively.
The selling price per unit of product X Rs. 24 and the selling price per unit of product Y Rs.
30 in both the sales areas.

Q8. X Ltd. produces and markets 3 products - chairs, tables and benches. The company is
interested in presenting its budget for the next quarter ending 31 st march. It expects to sell
4,200 chairs, 800 tables and 500 benches during the said period at the selling price of Rs. 50,
Rs. 85 and Rs. 158 per unit.
The following information is made available for this purpose.
Inventory levels planned:
Particulars Chairs ( Nos) Tables ( Nos) Benches ( Nos)
Opening stock 400 100 50
Closing stock 200 300 50

Prepare the production budget for the quarter ending 31st March.

Q9. From the following data , prepare a production budget for ABC Co. Ltd. for the six months period
ending on 30th June 2024.

Stocks for the budgeted period:

product As on I Jan 2024 As on 30 June 2024

A 6,000 10,000
B 9,000 8,000
C 12,000 17,500
Other relevant data:

product Normal Loss in production Requirement to fulfil sales

programme (units)
A 4% 60,000
B 25 50,000
C 5% 80,000
Q10. Prepare the sales budget from the following data showing the expected sales of product
A and product B .

Quarter Product A Units Product A Price ($) Product B Units Product B Price ($)
Q1 1,000 50 800 75
Q2 1,200 50 900 75
Q3 1,400 50 1,100 75
Q4 1,600 50 1,300 75

Q 11. Prepare the purchase budget from the following data:

Expected sales in units for each quarter: Q1: 1,000, Q2: 1,200, Q3: 1,400, Q4: 1,600
Desired ending inventory for each quarter: 10% of next quarter's sales
Beginning inventory for Q1: 100 units
Cost per unit: $30

Q12. M/s Ajay manufactures two types of toys : Pinku and Rinku and sales them in Mumbai
and Pune markets. The following information is made available for the year 2023-24.Prepare
the sales budget.

Market /product Budgeted sales

Mumbai
Pinku 400 units at Rs. 90 each.
Rinku 300 units at Rs. 210 each.

Pune
Pinku 700 units at Rs. 90 each.
Rinku 400 units at Rs. 210 each.

Q13. A company normally collects cash from credit customers as follows:

50 % in the month of sale, 30% in the first month after sale, 18% in the second month after
sale, and 2% are never collected. Sales, all on credit, are expected to be as follows:
Jan 5,00,000
Feb. 6,00,000
March 4,00,000
April 5,00,000

a) Calculate the amount of cash expected to be received from customers during March.
b) Calculate the amount of cash expected to be received from customers during April.
Q14. From the following forecast of income and expenditure prepare a Cash Budget for the
three months ending on June 2024.

Month Sales Purchase wages Misc. exp.

Feb 1.20,000 84,000 10,000 7,000
March 1,30,000 1,00,000 12,000 8,000
April 80,000 1,04,000 8,000 6,000
May 1,16,000 1,06,000 10,000 12,000
June 88,000 80,000 8,000 6,000

Additional information:
1. Sales: 20 % realised in the month of sales, discount allowed 2%, balance realised equally
in two subsequent months.
2. Purchases: these are paid in the month following the month of supply.
3. Wages: 25% paid in the same month.
4. Misc. Expenses: paid a month in arrears.
5. Rent Rs. 1,000 per month paid quarterly in advance due, in April.
6. Income from investment: Rs. 5,000 received quarterly in April, July etc.
7. Cash in Hand Rs. 5,000 in April 1, 2024.

Q15. A company has the following data for the next three months:

Month Sales Purchases Expenses

January 40,000 25,000 10,000
February 50,000 30,000 12,000
March 60,000 35,000 15,000

1. 50% of sales are collected in the month of sale, and the remaining 50% is collected the
following month.
2. Purchases and expenses are paid in the month incurred.
3. The opening cash balance in January is Rs. 10,000.