Unit IV - Budgets and Budgetary Control

Flexible Budget
This is a dynamic budget. It is a budget which is designed to change in accordance
with the level of activity. Actual output may differ from the budgeted output; and as such, it is
necessary to modify the budget on the basis of changed output. The budget is prepared in
such a way as to present the budgeted cost for different levels of activity, it is more realistic
and practical because changes expected at different levels of activity are given due
consideration. It is also called variable budget or sliding scale budge. The expenses are
divided into three categories Fixed, Variable and Semi variable. It is an important tool of
cost control, as it facilitates comparison of actual results with the budgeted figures.
ICWA, UK defines flexible budget as, "A budget which, by recognizing the difference
between fixed, semi-fixed and variable costs, is designed to change in relation to the level of
activity." Ascertainment of costs at various levels of activity becomes possible. Price fixation,
sending quotations and tenders and finding out profit at changed capacities are facilitating.

Preparation of flexible budget

A budget prepared in a manner so as to given the budgeted cost for any level of
activity is known as flexible budget. A flexible budget is the opposite of static budget. It is
prepared for a range of activity instead of a single level. Fixed costs are related mostly to the
period of time and are not concerned with the level of production nor volume of sale. Variable
costs very directly and proportionately with the volume of activity. At zero level activity, the
variable costs will not be existence.
The semi-variable costs occupy on in between position between the fixed and variable
costs. A part of these costs is variable and the rest is fixed. They are fixed to a certain level of
activity and then rise with increase in the level of activity but in the same proportion as the
activity increases. As a matter of fact budget for each department can be prepared on the lines
of flexible budget by classifying the costs into fixed and variable. In order to appropriately
fixed up; costs for different volumes, the degree of variability for each items cost at various
levels of output could e evolved on the basis of post experience. This requires a close study of
the individual items of expenditure, their nature and variability.
i)
ii)
iii)
iv)

Unit 4:

Decide the range of activity to develop a flexible budget.

Determine the cost behavior - fixed, variable and semi-variable to each
element of cost
Select the activity level (generally in terms of output)
Prepare the budget at each activity level.

(MBA I Sem.) By Prof. Yogesh Dhoke

Page

Proforma of Flexible Budget

Rahul Company Limited
Flexible Budget
For the year ended

Particulars
1

50%

Capacity
60%

70%

Variable expenses:
Direct material
Direct labour
Direct expenses
Office and Administrative Overhead/ Expenses
Manufacturing Overhead/ Expenses
Selling and Distribution Overhead/ Expenses
Overheads/ Expenses

Total Variable Cost (1)

Semi Variable expenses:Manufacturing Overhead/ Expenses

Indirect expenses
Office and Administrative Overhead/ Expenses
Repairs and Maintenance
Selling and Distribution Overhead/ Expenses

Total Semi Variable Cost (2)

Fixed Expenses:Depreciation on Assets

Office and Administrative Overhead/ Expenses
Manufacturing Overhead/ Expenses
Selling and Distribution Overhead/ Expenses
Rent, Rates and Taxes

Total Fixed Cost (3)

Total Cost (1 + 2 + 3)

(+) Profit/ (-) Loss

Sale

Unit 4:

(MBA I Sem.) By Prof. Yogesh Dhoke

Page

Notes:i)
ii)
iii)

Unit 4:

Fixed expenses are remaining constant on all level of production.

Variable expenses are always varies on the basis of changes in level of production.
If semi variable expenses are given in the example then it will be changed as per
given instruction, but it fixed and variable part semi variable expenses given
separately then fixed part remains constant and variable part will be changed as
per production capacity.

(MBA I Sem.) By Prof. Yogesh Dhoke

Page

Problems on Flexible Budget

Problem No. 1. The following data is available from the books of manufacturing company,
for the year ended on 31st December, 2012.
Particulars

Rs. (Lakhs)

Fixed expenses:
Wages and Salaries
Rent, Rates and Taxes
Depreciation
Sundry Administration

8.4
5.6
7.0
8.9
29.9

Semi Variable expenses (at 50% capacity)

Repairs and Maintenance
Indirect labour
Sales department salaries
Sundry administration

2.5
9.9
2.9
2.6
17.9

Variable expenses (at 50% capacity)

Material
Labour
Sundry

24.0
25.6
3.8
53.4

Assuming that fixed expenses, remain constant at all level of production. Variable
expenses varies proportionately and semi variable expenses remain constant between 45%
and 65% capacity increase by 10% between 65% & 80% capacity and by 20% between 80%
& 100% capacity.
Sales at various level areRs. (lakh)
Rs. (lakh)
60%
100.00
70%
120.00
90%
150.00
100%
170.00
Prepare flexible budget showing the cost of production at 60%, 70%, 90% & 100% capacity.

*******
Problem No. 2. Prepare flexible budget for the period ended 31st December, 2012
Particular
Fixed expenses
Management
Unit 4:

(MBA I Sem.) By Prof. Yogesh Dhoke

Rs.
2,10,000
Page

Rent and taxes

Depreciation on machine
Sundry office

1,40,000
1,75,000
2,22,500
7,47,500

Semi variable expenses (at 50% capacity)

Plant and repairs
Indirect labour
Salesman salary
Sundry expenses
Variable expenses (at 50% capacity)
Material
Labour
Salesman commission

62,500
2,47,500
72,500
65,000
4,47,500
6,00,000
6,40,000
95,000
13,35,000

Sales at 60% Rs. 25,50,000, Sales at 80% Rs. 34,00,000, at 100% Rs. 42,50,000.
Assuming that fixed costs remain constant, variable cost changes proportionately,
semi variable expenses remain constant between 40% to 70% capacity. Increase 10% of the
above figure between 70% to 85% capacity and increase by 15% of the above figure between
85% to 100% capacity.

*******
Problem No. 3. Prepare a flexible budget of production at 80% and 100% capacity on the
basis of following information
Production at 50% capacity 5,000 units
Raw material Rs. 80 per unit
Direct labour Rs. 50 per unit
Direct expense Rs. 15 per unit
Factory expenses Rs. 50,000 (50% fixed)
Administrative expenses Rs. 60,000 (50% fixed)
Problem No. 4. Following are the estimated budgeted for output of 10,000 units in factory
Particular
Material
Labour
Work overhead (variable)
Work overhead (fixed)
Direct expenses (variable)
Administration (fixed)
Unit 4:

(MBA I Sem.) By Prof. Yogesh Dhoke

Cost (per unit)

140
50
40
(Rs. 2,00,000) 20
10
(Rs. 1,00,000) 10
Page

Selling expenses (10% fixed)

Distribution expenses (20% fixed)
Total cost
Prepare flexible budget for 8,000 and 6,000 units.

20
10
3000

Problem No. 5. The cost of production at 25% capacity output 5000 units is given below
Particular
Material
Labour
Power
Repairs
Stores
Inspection
Depreciation
Administration
Selling

Rs.
25,000
15,000
1,250
2,000
1,000
500
10,000
5,000
3,000

(100% variable)
(100% variable)
(80% variable)
(75% variable)
(100% variable)
(20% variable)
(100% variable)
(25% variable)
(25% variable)

Prepare flexible budget for 4000, 5000 and 6000 unit.

*******
Problem No. 6. A factory is currently working at 50% capacity and produces 5000 units. A
budged is to be prepared for 60% and 80% capacity on the basis of following information.
At 60% capacity raw material cost increases 5% and selling price falls 5%. At 80% capacity ,
raw material increase by 10% and selling price falls 10%. At 50% the product cost and Rs. 72
per unit, sold Rs. 80 per unit. The cost is made up as
Material
Rs. 40
Labour
Rs. 12
Factory
Rs. 12(40% fixed)
Administration
Rs. 8(50% fixed)
Prepare flexible budget
Problem No. 7. A factory produces 15000 units at 50% capacity at which cost is Rs. 720 per
unit. The cost is made up as Material
Rs. 400
Wages
Rs. 120
Factory overhead
Rs. 120(40% fixed)
Office overhead
Rs. 80(50% fixed)
Selling price
800 per unit
At 60% capacity material increase by 2% and selling price falls by 2%, At 80% capacity
material increase by 5% and selling price fall by 5%. Prepare flexible budget.

Unit 4:

(MBA I Sem.) By Prof. Yogesh Dhoke

Page

*******

Problem No. 8. Following details have been extracted from the books of the company for
year ended 31st March, 1989.
Particulars
Sales
Direct material
Direct Wages
Direct exp.
Factory overhead
Administration overhead
Selling overhead
Profit

Rs.
13,60,800
4,00,000
2,80,000
20,000
1,40,000
1,68,000
1,26,000
2,26,800

50% of factory overhead and 60% of selling overhead are analyzing as variable. The
forecast for the next year ending 31.3.1990.
(i)
(ii)

Sales volume will increased by 30% but selling price will be reduced by 5%.
The raw material prices remains unchanged but, purchase price will be reduced by
5%.
(iii)
Variable overhead, selling and factory, direct wages and expense changed
proportionately.
(iv)
Wages and factory overhead (variable only) go up by 10%.
(v)
Administration overhead will be decreased by 2%.
(vi)
There is no opening or closing stock of work in progress.
Pre pare budget (flexible) for the next year.

*******
Problem No. 9. Prepare flexible budget for the year ended from the following data, available
in respect of 70%, 85% and 100% capacity. When the sale are Rs. 1,10,000, Rs. 1,34,000 and
Rs. 1,50,000.
Fixed cost remains constant, semi-variable cost constant between 60% and 75%
capacity, increasing 10% between 75% and 90% and 20% between 90% and 100% capacity.
Expenses for 60% capacity as follows
Particular
Variable overhead
Material
Labour
Direct expenses
Unit 4:

(MBA I Sem.) By Prof. Yogesh Dhoke

Rs. Lakhs
30.00
18.00
3.60
Page

Fixed expenses
Salary and wages
Rent and rates
Depreciation
Sundry

8.40
5.00
6.00
8.00

Semi-variable exp
Repairs and maintenance
Indirect labour
Selling expenses
Sundry

3.00
10.00
2.00
2.00
96.00

*******
Problem No. 10. Rajesh Engineering Work had prepared his budget for 1987 based on
production of 1,00,000 units for their only product on following amount of Rs. 1000.
Particular
Raw material
Direct labour
Direct exp.
Work overhead
Administration
Selling overhead

Rs.
252
75
10
225 (60% fixed)
40
20 (50% fixed)

Actual production is to be estimated for 60,000 units. Calculate cost per unit and show the
flexible budget.

*******
Problem No. 11. A flexible budget at 60%, 80% & 100% production capacity is to be
prepared from the following information for the 3 months ending 31st December 1979.
Particular
Fixed exp.
Management salaries
Rent & taxes
Dep. On machinery
Sundry office cost.

Rs.
42,000
28,000
35,000
44,500

Semi-variable exp. at 50% capacity

Unit 4:

(MBA I Sem.) By Prof. Yogesh Dhoke

Page

Plant maintenance
Indirect labour
Salesman salary
Sundry exp.

12,500
49,500
14,500
13,000

Variable exp. at 50% capacity

Material
1,20,000
Labour
1,28,000
Salesman commission
19,000
Semi-variable exp. remains constant between 40% & 70% capacity, increased by 10%
of the above figures between 70% & 85% capacity and increase by 15% of the above figure
between 85% and 100% capacity.
Fixed exp. remains constant whatever the level of activity. Sales at 60% capacity are
Rs. 5,10,000, at 80% capacity Rs. 6,80,000 and at 100% capacity and 8,50,000.
It is to be assumed that the items produced and sold. Prepare flexible budget.

*******

Unit 4:

(MBA I Sem.) By Prof. Yogesh Dhoke

Page

Cash budget
This budget represents the amount of cash receipt and payments and a balance during
the budgeted period. It is prepared after all the functional budgets are prepared by Ate chief
accountant either monthly or weekly giving the following hits.
(i) It ensure sufficient cash for business requirement
(ii) It proposes arrangement to be made overdraft to meet any shortage of cash.
(iii)It reveals the surplus amount, and the effect of the seasonal fluctuations on cash
position. The objective of cash budget is the proper co-ordination of total
working capital, sales, investment and credit.
PROFORMA OF CASH BUDGET
Cash Budget
Particular
A) Opening balance (cash)
B) Cash receipt (in flow)
1) Cash sale
2) Credit sale realised
3) Sale of assets
4) Calls on shares
5) Other income
Total receipt (B)
C) Cash payment (outflow)
1) Cash purchase (material)
2) Credit purchase (payment to supplier)
3) Wages and salary
4) Factory overhead
5) Office & administrative overhead
6) Selling & dist. overhead
7) Other exp. (rent)
8) Income tax
9) Purchase of assets
10) Redemption of debenture/ share etc.
Total payment (C)

Unit 4:

Jan
xxx

Capacity
Feb
Mar Apr May
xxx
xxx xxx
xxx

xx
xx
xx
xx
xx

xx
xx
xx
xx
xx

xx
xx
xx
xx
xx

xx
xx
xx
xx
xx

xx
xx
xx
xx
xx

xxx

xxx

xxx

xxx

xxx

xx
xx
xx
xx
xx
xx
xx
xx
xx
xx

xx
xx
xx
xx
xx
xx
xx
xx
xx
xx

xx
xx
xx
xx
xx
xx
xx
xx
xx
' xx

xx
xx
xx
xx
xx
xx
xx
xx
xx
xx

xx
xx
xx
xx
xx
xx
xx
xx
xx
xx

xxx

xxx

xxx

xxx

xxx

(MBA I Sem.) By Prof. Yogesh Dhoke

Page

Closing cash balance (B-C)

xx
xx
xx
xx
xx
Notes;
i)
If closing balance comes in (+) then it will be cash and bank balance, but if answer
comes in (-) Then it will be bank overdraft.
ii)
In cash budget only cash receipt and payment will be taken.
iii)
Non cash transaction for example. Credit, sales, purchase, discount paid and
received. Depreciation on assets, goodwill, patent, factious assets write off, provision
for only kind of reserve etc. will not be included in cash budget.

*******
Problems on Cash Budget
Problem No. 12. Prepare cash budget for 6 months commencing form next year.
Month

(cash + credit)
Total sale
20,000
22,000
24,000
26,000
28,000
30,000

Material

Wages

Production
overhead
3,200
3,300
3,300
3,400
3,500
3,600

Selling & dist

overhead
800
900
800
900
900
1,000

January
20,000
4,000
February
14,000
4,400
March
14,000
4,600
April
12,000
4,600
May
12,000
4,800
June
16,000
4,800
Note
1.
Cash balance on 1st January was Rs. 10,000.
2.
A new machine is to be installed at Rs. 30,000 on credit to be paid in 2 equal
installment payable in March and April.
3.
Sale commission 5% on total sale payable in the next month.
4.
Rs. 10,000 being 2nd call on shares, receivable in March along with premium Rs. 2000
5.
Supplier period 2 months, customers period 1 month.
6.
Overhead 1 month
7.
Wages months, cash sale 5% of total sale.

*******

Unit 4:

(MBA I Sem.) By Prof. Yogesh Dhoke

Page

Problem No. 13. Rahul Co, Ltd. Has furnished the following information.
Mont
h

Credit
Credit
sale purchase

Wages

Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun

80,000
60,000
40,000
50,000
60,000
80,000
70,000
60,000
50,000

10,000
9,000
8,000
9,000
10,000
11,000
9,000
8,000
9,000

40,000
30,000
20,000
40,000
50,000
60,000
50,000
30,000
40,000

Productio
n
overhead
6,400
8,000
7,500
8,000
8,500
9,000
8,000
7,500
8,000

Admn.
Overhea
d
3,400
3,300
3,500
3,700
3,900
3,600
3,500
3,700
3,900

Sellin
g

Distributio
n

R/D

5,000
4,500
4,000
4,400
4,800
5,200
5,000
4,800
4,500

3,000
2,500
2,000
2,400
2,600
2,900
2,600
2,500
2,400

1,00
0
1,00
0
1,00
0
1,20
0
1,20
0
1,20
0
1,50
0
1,50
0
1,50
0

Note
1.
Credit turnover ratio 2 months.
2.
Debtors turnover 3 months.
3.
Overhead on month.
4.
Lag in payment of wages 1/8 times.
5.
Cash balance on 1st January expected Rs. 1,00,000
6.
Plant & machinery is to be installed in April at a cost of Rs. 50,000 will be paid in
monthly installment Rs. 10,000 from 1st May.
7.
Extension to R/D department Rs. 10,000 shall be completed in January paid in
February 1st .
8.
A sale commission of 10% on sale is to be paid within the month following the month
of sale.
9.
Cash sale p.m. expected Rs. 5000 no commission payable on sale.
10.
Company has to pay higher purchase installment and 5000 p.m. likely to be continue
through out the budget period.
11.
Preference share capital is Rs. 20,00,000 on which 8% dividend is payable on 1 st
April.
12.
Advanced tax due on 1st April Rs. 1,00,000
13.
Rs. 70,000 is expected on 1st May by way of dividend on investment.

Unit 4:

(MBA I Sem.) By Prof. Yogesh Dhoke

Page

14.

Calls of 25% on equity shares Rs. 2,00,000 are due on 1 st January, 1st March, 1st June
Prepare cash budget for 6 month ending June.

*******

Unit 4:

(MBA I Sem.) By Prof. Yogesh Dhoke

Page

Problem No. 14. Prepare cash budget for April to June.

Actual budgeted sales
Actual budgeted sales
January
February
March
April
May
June

80,000
80,000
75,000
90,000
85,000
80,000

Actual & budgeted purchases

January
February
March
April
May
June

45,000
40,000
42,000
50,000
45,000
35,000

Actual & budgeted expenses & wages

Wages
January
20,000
February
18,000
March
22,000
April
24,000
May.
20,000
June
18,000
Note
1)
Advance tax payable in May Rs. 4000.
2)
Rent Rs. 300 p.m. payable in advance not included in expenses.
3)
10% purchase and sale on cash basis.
4)
Credit purchases paid for one month.
5)
Plant purchases April Rs. 10,000
6)
Credit sales collection 2 months
7)
Wages and expenses months
8)
Opening cash balance on 1st April Rs. 13000
Prepare cash budget.

Exp.
5,000
6,000
6,000
7,000
6,000
5,000

*******

Unit 4:

(MBA I Sem.) By Prof. Yogesh Dhoke

Page

Problem No. 15. Rajesh Ltd. wishes to arrange overdraft facility with its bankers during the
period April to June 2012. Prepare the cash budget.
Month
February
March
April
May
June
Note:-

Sales
90,000
96,000
54,000
87,000
1,13,000

Purchase
62,400
72,000
1,21,500
1,23,000
1,34,000

Wages
6,000
7,000
5,500
5,000
7,500

1. 50% of the above sales will be realized in the month February and remaining balance
in the next month.
2. Credit for purchase will be paid in the month.
3. Cash at balance on 1st April Rs. 12,500.
4. Workers are paid wages I the same month.
Show cash budget estimate overdraft requirement.

*******
Problem No. 16. Rahul manufacturing company request to you prepare cash budget on the
basis following information
Month
January
February
March
April
May
June
Note:-

Sales
36,000
48,500
43,000
44,300
51,250
54,350

Material
12,500
15,500
12,750
15,300
18,500
19,400

Wages
5,000
6,050
5,300
12,500
11,000
11,500

Selling
exp.
2,000
2,500
2,750
3,350
4,250
4,500

Manufacturin
g exp.
3,000
3,150
3,000
3,250
4,000
4,100

Office
exp.
750
850
1,000
1,100
1,250
1,250

1) 50% of the sales are on cash basis.

2) Assets are to be acquired in the month of February and April as such previous for Rs.
4,000 and 12,500 be made.
3) Bank loan is expected to be required in the month of May Rs. 15,000.
4) Debtors are allowed one month credit.
5) Creditors allowed one credit.
6) Sales commission at 3% is to be paid.
7) A dividend Rs. 17,500 will be paid in June.
8) Cash balance as on 1.1. 2013 is expected to be Rs. 36,250.

*******
Unit 4:

(MBA I Sem.) By Prof. Yogesh Dhoke

Page

Problem No. 17. A company excepts to have Rs. 25,000 in bank on 1 st May, 2012 and
requires you to prepare and estimate of cash position during the three month May, June, July
2012. The following information is supplied to you.
Month

Sales

Purchase

March
50,000
April
56,000
May
60,000
June
80,000
July
90,000
Other information:
i)
ii)
iii)
iv)
v)
vi)

Wages

30,000
32,000
35,000
40,000
40,000

6,000
6,500
7,000
9,000
9,500

Factory
exp.
5,000
5,500
6,000
7,500
8,000

Office
exp.
4,000
4,000
4,000
4,000
4,000

Selling
exp.
3,000
3,000
3,500
4,500
4,500

20% of sales are in cash remaining amount is collected in the month following the
month of sale.
Supplier supply goods at 2 months credit.
Wages and all other exp. are paid in the month of following the one which they are
incurred.
The company pays dividend to shareholders and bonus to the workers Rs. 10,000;
Rs. 15,000 respectively in the month of May.
Plant has been ordered and is expected to be received in June it will cost Rs.
80,000 to be paid in June.
Income tax Rs. 25,000 is payable in July.

*******
Problem No. 18. From the following figures, Prepare cash budget in respect of 3 months to
June 30.
Month
January
February
March
April
May
June

Sales
60,000
56,000
64,000
80,000
84,000
76,000

Material
40,000
48,000
50,000
56,000
62,000
50,000

Wages
11,000
11,600
12,000
12,400
13,000
14,000

Overheads
6,200
6,600
6,800
7,200
8,600
8,800

Expected cash balance on 1st April Rs. 20,000.

Other information
i)
ii)
iii)

Unit 4:

Material and overhead are to be paid in the month following the month of supply.
Wages are to be paid during the month in which they are incurred.
The terms of credit sales are payment by the end of the month following the
month of sale. Half of the sales are paid when due, the other half to be paid during
the next month.
(MBA I Sem.) By Prof. Yogesh Dhoke

Page

iv)
v)
vi)
vii)

5% sales commission is to be paid within the month following actual sales.

Preference dividend for Rs. 30,000 is to be paid on 1st May.
Share call money for Rs. 25,000 is due on 1st April and 1st June.
Plant and Machinery worth Rs. 10,000 is to be installed in the month of Jan and
the payment is to be made in the month of June.

*******
Problem No. 19. Estimate the cash requirement of Rajeshwar Co. Ltd. for June 2012 on the
basis of data given below
1) Sale February 2012
Rs. 25,000
March
Rs. 20,000
April to June
Rs. 30,000 p.m.
Roughly half the sale are for a cash 20% of credit sale are collected in the next month
of sale and the balance one month late.
2) Cash discount of 5% the purchase budget for the second quarter (April to June) was
Rs. 15,000. Basket p.m. at Rs. 1 per Basket.
3) Wages and salaries for second quarter were budgeted at Rs.5,000 p.m.
4) Manufacturing and other exp. budgeted for the quarter
Cash expenses
Rs. 4,500
Depreciation
Rs. 7,500
Selling expenses
Rs. 3,000
Administration expenses
Rs. 2,000 (in April & May only)
Prepare cash budget.

*******

Unit 4:

(MBA I Sem.) By Prof. Yogesh Dhoke

Page

Miscellaneous Problems on Budget

Problem No. 1. A factory is currently working at 50% capacity and produces 10,000 units at
a cost of Rs. 180 per unit as per details belowParticulars
Material
Labour
Factory overhead (Rs. 12 fixed)
Administrative overhead (Rs. 10 fixed)
Total

Rs.
100
30
30
20
180

The current selling price is Rs. 200 per unit. At 60% working material cost per unit
increases by 2% and selling price per unit falls by 2%. At 8% working, material cost per unit
increases by 5% and selling price per unit fall by 5%.
Estimate profits of the factory at 60% and 80% working and offer your comments.

*******
Problem No. 2. The monthly budgets for the manufacturing overhead of a concern for two
levels of activity were as follows
Capacity
Budget production units

60%
600%
Rs.
1,200
900
1,100
1,600
4,000
1,000

Indirect wages
Consumable stores
Maintenance
Power and fuel
Depreciation
Insurance

100%
1000%
Rs.
2,000
1,500
1,500
2,000
4,000
1,000

a. Indicate which of the items are fixed, semi-fixed and variable.

b. Prepare a flexible budget for 80% of the activity.

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Unit 4:

(MBA I Sem.) By Prof. Yogesh Dhoke

Page

Problem No. 3. For the production 10,000 electronic automatic irons, the following are the
budgeted expenses.
Particulars
Direct material
Direct labour
Variable overhead
Fixed overhead (Rs. 1,50,000)
Variable expenses (direct)
Selling expenses (10%) fixed
Administration expenses (Rs. 50,000) for all level of productions
Distribution expenses (20%) fixed
The Total cost of sale per unit

Per unit Rs.

60
30
25
15
5
15
5
5
160

Prepare budget for the production of 6,000; 7,000 and 8,000 irons, showing distinctly
the marginal cost and the total cost.

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Problem No. 4. The cost of an article level of 10,000 units is given under a below for a
variation in capacity above or below this level, the individual expenses vary as indicated in B
below
Particulars
Material cost
Labour
Power
Repairs and maintenance
Stores
Inspection
Depreciation
Administration overheads
Selling overhead

A (Rs.)
50,000
30,000
3,000
3,500
2,000
800
10,000
3,600
4,500

B (Rs.)
(100% Varying)
(100% Varying)
(80% Varying)
(80% Varying)
(100% Varying)
(25% Varying)
(100% Varying)
(25% Varying)
(50% Varying)

1,07,400
Total
10,74
Cost per unit
Find out the unit cost of the produce under each individual expenses at production
level of 8,000 units and 12,000 units.

*******

Unit 4:

(MBA I Sem.) By Prof. Yogesh Dhoke

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