Question

In: Accounting

URGENT 7.(a)From the following data prepare a flexible budget for production of 40000 units clearly showing...

URGENT
7.(a)From the following data prepare a flexible budget for production of 40000 units clearly

showing variable cost, fixed cost, and total cost. Budgeted capacity output is 1 lakh units and

the budgeted cost per unit is given below: (7.5+7.5=15 marks)

Direct Material Rs 95/unit.

Direct Labour Rs 50/unit.

Production overhead (75% variable) Rs 40/unit.

Administration overhead (100% fixed) Rs 5/unit.

Selling overhead (20% fixed) Rs10/unit.

(b) Prepare a Production Budget for the six months period ending on 30th June,2017 and find total

Production.

Stocks for the budgeted period:

Product As on 01 January, 2017 As on 30 June, 2017

A 6,000 10,000

B 9,000 8,000

other relevant data:

Product Normal loss in production Requirement to fulfill sales programme (units)

A 4% 60,000

B 2% 50,000

Expert Solution

a)	Flexible Budget

	Production			40000	units

	Variable Costs:
	Direct Material	(40000 x Rs. 95)		₹ 38,00,000.00
	Direct Labor	(40000 x Rs. 50)		₹ 20,00,000.00
	Production OH	(40000 x Rs. 40 x 75%)		₹ 12,00,000.00
	Selling OH	(40000 x Rs. 10 x 80%)		₹ 3,20,000.00
	Total Variable Costs		(A)	₹ 73,20,000.00

	Fixed Costs:
	Production OH	(100000 x Rs. 40 x 25%)		₹ 10,00,000.00
	Administrative OH	(100000 x Rs. 5)		₹ 5,00,000.00
	Selling OH	(100000 x Rs. 10 x 20%)		₹ 2,00,000.00
			(B)	₹ 17,00,000.00

	Total Cost		(A+B)	₹ 90,20,000.00

b)	Production Budget

	Particulars		A	B

	Estimated sales (in units)		60000	50000
Add:	Desired closing stock		10000	8000
			70000	58000
Less:	Estimated opening stock		6000	9000
	Estimated net production		64000	49000
Add:	Normal loss	(W.N.1)	2667	1000
	Estimated gross production		66667	50000

W.N.1

Normal Loss of A	=	64000 x 4/96
	=	2666.667

Normal Loss of B	=	49000 x 2/98
	=	1000

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