Table of Contents
Problem 1
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) |
Solution
Flexible Budget at a Capacity of | |||
Capacity of Output Units |
50% 5,000 |
80% 8,000 |
100% 10,000 |
$ | $ | $ | |
Raw Material | 4,00,000 | 6,40,000 | 8,00,000 |
Labor | 2,50,000 | 40,000 | 50,000 |
Direct Expenses | 75,000 | 1,20,000 | 1,50,000 |
Prime Cost | 7,25,000 | 11,60,000 | 14,50,000 |
Factory Expenses 50% fixed (50,000) | 25,000 | 40,000 | 50,000 |
Factory Cost | 7,75,000 | 12,25,000 | 15,25,000 |
Admin Expenses fixed 40% (60,000) | 24,000 | 24,000 | 24,000 |
Variable 60% | 36,000 | 57,600 | 72,000 |
Total Cost | 8,35,000 | 13,06,000 | 16,21,000 |
Problem 2
The following data are available in a manufacturing company for a yearly period:
$ | |
Fixed expenses: | |
Wages and Salaries | 9,50,000 |
Rent, Rate & Taxes | 6,60,000 |
Depreciation | 7,40,000 |
Sundry Admin Expenses | 6,50,000 |
Semi Variable Expenses at 50% Capacity: | |
Maintenance & Repairs | 3,50,000 |
Indirect Labor | 7,90,000 |
Sales Deptt. Salaries etc. | 3,80,000 |
Sundry Admin Salaries | 2,80,000 |
Variable Expenses: | |
Material | 21,70,000 |
Labor | 20,40,000 |
Other Expenses | 7,90,000 |
Total | 98,00,000 |
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:
50% | Capacity | 100 |
60% | Capacity | 120 |
75% | Capacity | 150 |
90% | Capacity | 180 |
100% | Capacity | 200 |
Required:
Prepare a Flexible Budget for the year and forecast the profit at 60%, 75%, 90% and 100% capacity.
Solution
Flexible Budget | |||||
50% ($) | 60% ($) | 75% ($) | 90% ($) | 100% ($) | |
(A) | |||||
Variable Expenses | |||||
Material | 21,70,000 | 26,04,000 | 32,55,000 | 39,06,000 | 43,40,000 |
Labor | 20,40,000 | 24,48,000 | 50,60,000 | 36,72,000 | 40,80,000 |
Other expenses | 7,90,000 | 9,48,000 | 11,85,000 | 14,22,000 | 15,80,000 |
Semi Variable Expenses | |||||
Maintenance & Repairs | 3,50,000 | 3,50,000 | 3,85,000 | 4,20,000 | 4,20,000 |
Indirect labor | 7,90,000 | 7,90,000 | 8,69,000 | 9,48,000 | 9,48,000 |
Sales Deptt. Salaries | 3,80,000 | 3,80,000 | 4,18,000 | 4,56,000 | 4,56,000 |
Sundry Expenses | 2,80,000 | 2,80,000 | 3,08,000 | 3,36,000 | 3,36,000 |
Fixed Expenses | |||||
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 |
Depreciation | 7,40,000 | 7,40,000 | 7,40,000 | 7,40,000 | 7,40,000 |
Sundry admin | 6,50,000 | 6,50,000 | 6,50,000 | 6,50,000 | 6,50,000 |
Total Cost (A) | 98,00,000 | 108,00,000 | 124,00,000 | 141,60,000 | 152,60,000 |
Sales (B) | 100,00,000 | 120,00,000 | 150,00,000 | 180,00,000 | 200,00,000 |
Profit (A – B) | 2,00,000 | 12,00,000 | 25,20,000 | 38,40,000 | 47,40,000 |
Problem 3
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 $180 is made up as follows:
Material: 100
Labor: 30
Factory overhead: 30 (40% fix)
Admn. overhead: 20 (50% fix)
Solution
Output: 10,000 unit 50% capacity | Output: 12,000 units 60% capacity | Output: 16,000 units 80% capacity | ||||
Per unit ($) | Total ($) | Per unit ($) | Total ($) | Per unit ($) | Total ($) | |
Sales Value | 200 | 20,00,000 | 196 | 23,52,000 | 190 | 30,40,000 |
Material Cost | 100 | 10,00,000 | 102 | 12,24,000 | 105 | 16,80,000 |
Labor Cost | 30 | 3,00,000 | 30 | 3,60,000 | 30 | 4,80,000 |
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 |
Fixed OH | 10 | 1,00,000 | 8.33 | 1,00,000 | 6.25 | 1,00,000 |
Total Cost | 180 | 18,00,000 | 178.33 | 21,40,000 | 176.25 | 28,28,000 |
Profit | 20 | 2,00,000 | 17.67 | 2,12,000 | 13.25 | 2,12,000 |
Present operating at 80% capecity produce and salls 40000 units these are expencess per unit.
Direct Material. 15
Direct labour. 10
Factory overhead. 5
Salling overhead. 2
Salling price. 45
Prepare a budget at 60% & 90% capecity…. Plz solve this sir. Whatsapp no..7247580403…
in solution of problem 1, treatment of factory expenses is not correct.