For the first problem, prepare a flexible budget for 80% and 90% output based on given percentages. In the second scenario, calculate total costs at Rs. 700,000 per unit for 12,000 and 15,000 units.
Problem 1: Flexible Budget Preparation
In the first scenario, the company produces a product with various associated expenses at a normal capacity of 10,000 units. The expenses include prime cost, indirect expenses (30% variable and 70% fixed), maintenance expenses (60% variable and 40% fixed), salaries (100% fixed), depreciation (fixed), and power and fuel (variable 70% and fixed 30%). Additionally, there are costs for direct material, direct labor, variable factory overheads, fixed factory overheads (Rs. 200,000), fixed administration overhead, and selling and distribution overheads (75% fixed).
To prepare a flexible budget for 80% and 90% output levels, calculate the flexible budget for each expense item based on the given percentages for both output levels. Summing up these costs will provide the total flexible budget for each scenario.
Problem 2: Flexible Budget for Production of 12,000 and 15,000 Units
In the second scenario, the company incurs costs for direct material, direct labor, variable factory overheads, fixed factory overheads (Rs. 200,000), fixed administration overhead, and selling and distribution overheads (75% fixed). Given the per-unit costs for producing 50% of the product (Rs. 700,000), prepare a flexible budget for the production of 12,000 units and 15,000 units.
To accomplish this, calculate the total costs for each component at the given per-unit costs, then sum up these costs for both production levels (12,000 units and 15,000 units). This will yield the total flexible budget for each production scenario.
The expected answers for the first problem are a flexible budget of Rs. 1,337,000 for 80% output and Rs. 1,456,000 for 90% output. For the second problem, the total costs are expected to be Rs. 1,044,000 for 12,000 units and Rs. 1,192,500 for 15,000 units.
Complete question below:
Problem 1: Flexible Budget Preparation
A company produces a product, and the following expenses are associated with a normal capacity of 10,000 units:
Prime cost
Indirect expenses (30% variable and 70% fixed)
Maintenance expenses (60% variable and 40% fixed)
Salaries (100% fixed)
Depreciation (fixed)
Power and fuel (Variable 70% and fixed 30%)
The costs for the production of the product are as follows:
Direct material costs
Direct labour costs
Variable factory overheads
Fixed factory overheads (Rs. 200,000)
Fixed administration overhead
Selling and distribution overheads (75% fixed)
Given cost data for the production of 10,000 units, with a breakdown of per-unit costs, the task is to prepare a flexible budget for 80% and 90% output levels to be achieved in the next month.
Problem 2: Flexible Budget for Production of 12,000 and 15,000 Units
A company incurs the following costs for the production of a product:
Direct material costs
Direct labour costs
Variable factory overheads
Fixed factory overheads (Rs. 200,000)
Fixed administration overhead
Selling and distribution overheads (75% fixed)
Given the per-unit costs for producing 50% of the product (Rs. 700,000), the task is to prepare a flexible budget for the production of 12,000 units and 15,000 units.