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Additional Flexible Budget Problem
Additional Flexible Budget Problem
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:
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: