Prepare a flexible budget for the production of 80% and 100% activity on the basis of the following information.
|Production at 50% Capacity||5,000 Units|
|Raw Material||$80 per unit|
|Direct Labor||$50 per unit|
|Direct Expenses||$15 per unit|
|Factory Expenses||$50,000 (50) (Fixed)|
|Administration Expenses||$60,000 (Variable)|
|Flexible Budget at a Capacity of|
|Factory Expenses 50% fixed (50,000)||25,000||40,000||50,000|
|Admin Expenses fixed 40% (60,000)||24,000||24,000||24,000|
The following data are available in a manufacturing company for a yearly period:
|Wages and Salaries||9,50,000|
|Rent, Rate & Taxes||6,60,000|
|Sundry Admin Expenses||6,50,000|
|Semi Variable Expenses at 50% Capacity:|
|Maintenance & Repairs||3,50,000|
|Sales Deptt. Salaries etc.||3,80,000|
|Sundry Admin Salaries||2,80,000|
Assume that the fixed expenses remain constant for all levels of production, the semi-variable expenses remain constant between 45% and 65% capacity; increasing by 10% between 65 percent and 80 percent capacity; and by 20 percent between 80% and 100% capacity.
Sales at various levels are:
Prepare a Flexible Budget for the year and forecast the profit at 60%, 75%, 90% and 100% capacity.
|50% ($)||60% ($)||75% ($)||90% ($)||100% ($)|
|Semi Variable Expenses|
|Maintenance & Repairs||3,50,000||3,50,000||3,85,000||4,20,000||4,20,000|
|Sales Deptt. Salaries||3,80,000||3,80,000||4,18,000||4,56,000||4,56,000|
|Wages & Salaries||9,50,000||9,50,000||9,50,000||9,50,000||9,50,000|
|Rent/Rates & Taxes||6,60,000||6,60,000||6,60,000||6,60,000||6,60,000|
|Total Cost (A)||98,00,000||108,00,000||124,00,000||141,60,000||152,60,000|
|Profit (A – B)||2,00,000||12,00,000||25,20,000||38,40,000||47,40,000|
A factory is currently working to 50% capacity and produces 10,000 units. Estimate the profits of the company when it works at 60% and 80% capacity and offer your critical comments.
At 50% working raw material cost increases by 2% and selling price falls by 2%. At the 80% working raw material cost increases by 5% and selling price falls by 5%.
At 50% working the product costs $180 per unit and is sold at $200 per unit.
The unit cost of $180 is made up as follows:
Factory overhead: 30 (40% fix)
Admn. overhead: 20 (50% fix)
|Output: 10,000 unit 50% capacity||Output: 12,000 units 60% capacity||Output: 16,000 units 80% capacity|
|Per unit ($)||Total ($)||Per unit ($)||Total ($)||Per unit ($)||Total ($)|
|Variable Factory Overhead||18||1,80,000||18||2,16,000||18||2,88,000|
|Fixed Factory Overhead||12||1,20,000||10||1,20,000||7.50||1,20,000|
|Variable Admn. Overhead||10||1,00,000||10||120,000||10||1,60,000|