. :.

q J i ;l l ~f -
·. if-.if Z ~ cf aifq; ~Of
( C l a s si· li c a tion o r B udge- t)--.,,·
t.

I
~ * a f r l-ITT"~
(O n rhe basis
·_
ffiil<lT~ -qf .
. _(On the ba~is of
· ·
1
~t
· arJlmof'qf
. -· (On the sis
· ·
ha
I .
. . O n th e basis
_~ l~ bi li ty,_) .-. · Limit? of Activities)
of Time) .. . ·>
.;

~ ~ i c:fi Iffi ➔ -~ ~·- .. a ti J ll$ iR Z

~dctirctl ➔ ... ~ , (Partly Budget)""'
~
~ ,- . ~ , ·, (Corhplete · ; , : _- .: . •.
ud ge t)
:Sh qr t- te rm_ ·•-- (Current . , · · -B
(L ong-te rm
B ud ge t) · B ud ge t)
Budget)

fi -- c rr r~
., ,
•" .
._ ,. ,· - -~f4crof~ - ·-.< ·
f ~ \ '1'- 'IC .. -
, (flexible B~dg~t) ~
(S latic B ud ge t) ✓

fl lR { ~ (~ ub si Ji ar y Budget)
/""

·y ...✓(Master B ud
ge t) . 1
_- _,_ '., ",\· . • •__ •
- .. I
, .. ._ . · _r

(Production C os t B
udget) : •·_ · i ·,

-I .-. -.
. ... - .
. ., A_~ ~~ -
.
. 3<4iiC::f':ol
·, '

..
_(Plant Budget) ·
----w r ~ - . , -

. (Produc-tion
~ i' l! ft ~ . (Jverheads Budget) .
._ ~ a t eri al Bud
g~t)
Example 1. .
AA titj q-, 1997 cftf ~ fuv: ~Eh l<& I~ rt, tj i.t i{1 =i ~ ~ ~- -
_. flUllf~d ~ 50% .
The following data relat e to the work ing of a facto_r for the ye.a.r 1997
~ _·
Capa city Wor ked 50%
~ t"iPicl. (Fix ed Costs)...:.. . ,: , . . · ·
Rs . .
ffi (Sal aries ) _; .
· 8 000
fchll lt I cJ ~ (Ren t & .Rate s) '
6,00 0
~ (Dep recia tion ) ·
7,00 0
21,000
qflc1d·=i~f)(1 ~Pl< l (Vai iabi~ Cos ts)- ....
Rs. .
· fili:t ~1 (Ma_
t eri~l s) ; .. , . 20,000 -
WT (lab our) . · · · ., · ·25,000 .
~ ~ ( Oth er expe nses ) · .· · 30,000 · · ·
_., • ~ ,;' • I.

>
t' • •
,,
' .. 75,0 00
ti it I~ =i ~ fqf'°R lfGT ~ SH.a If~ ct~ ~. .
Prop osed sales at vario us levels of ~ork,ing·a_~e - -··
a:14?11 (Cap acity )· ·· f~( Sal es) ~-
',.
. · Rs. -- · . _-. . '

_.6Q% . ·- 1,00~000 : ·, ·.__. .

..
. .1,40,000 .- , . _.
.
' '

80% .

• ,,_. • • - • ; ' ·f

' ,_ ,._ I :
 90'i'{). · . • ,, ,. : . 1 .60.~ ·
. 100% . . ·• . · : · · · 1,90,~
~~ t 60, so, 90 om 1oo 'll[m@ ~ ~ ~ l!.<fi ~~lP.f~ ~ ~
'ffi~ qfif 1rIT:rmr R©I $ij I . . , , . ., • . . ., , •.
. . •. Pre pare a Flexible Budget and show the forecast of pr~fi~ .~.r60! 80'. 90 at.cl ....
100 percent capacity of opcratim1s 1 · • :· - , • • • · • ' •-- ·- '· · •

Solution - Flexible Hudgct (for the year, 19?7) ..- .·:- · ;'., :· ·: r.; .·
• . '
,·,
Operationg
..
Capacity · · .:_
. - ·:·•• •~• r . •·," •
' , ... ~ . .
P.&1rticulars . .
"

60%Rs. 80% Rs. 90% Rs~· 100%Rs·-:

- . , l , ,

A. Fixed Costs ,·· .J

. '
~;
. ·, ~
•·
','

Salaries .8,000 8,000 8,000 ~,OOo

Rent & Rates ' 6000 6,000 6,000 _6,000
Depreciation
'
7,000 - 7000
.,.

.7,00(j :,_· '

7,000
'
~
' .' , -
Total of A. 21,000 _~1,ooq 21,000 ·_21,000 .
B. Variable Costs
., ''

. Materials· · 24,000 32,000 36,000 40,000

Labour 30,000 . 40,000 45,000 50'000
.

Other Exps. 36,000 ,48,000 54,000 60,000· ,

. ,

Total Cost (A + B)
!

1,11,000 1,41,000 1;56,000 1,71,000 .

Pofit ( + ) or Lo_ss ( - ) · - - 11,000 - _1,000 + 4,000 + 19,lXXl ': .,_ ..
·,. ' ;

Sales 1,00,000 1,40,000 1,60,000 _1,90,000 ·

. Working. -, . Capacity ·.

60% 80% · 90% ·_.: 100%>'.'.< \·:

(1) · Materials 20,000 X 60 20.000 X 80 20-,()()(} :X .9() 20,000 'x 100·:'\./::·
50 50 50 ~ - .:>(:·_.· .
' ' -:;; Rs. 24,000 ~ Rs. 32,'000 -.= Rs. 36,000 --Rs. -4(),{XI.._-\_;•.~
{2) : Labour ·
~ooo x 60 .. 2.s,000 x so _. ·2s,OOO x 90 ·25,000 x 1ml:. ~ ·,
50 · ·50 50 · · . 50 - :;>~·---~.
= Rs, 30,GOp ~ Rs. 40,000 ·- = Rs~45,000 - . Rs.~(xi( ?/· ._:
(3) Other Exps, _30,000 x 60 · 30,000 x 80 30,000 x9o 30,000x 1qt .}:-{_·;
· --._so so .50· · , '• ·so · - · <
. . . ,,..,. '
. .
6
. - ·. = ~s."3 ,000 - == ._ Rs. 48,000 -= RS: 54 ooo·· :. . Rs.60~~ ~--~~-l, .
. . '- ·: .. '_.· : :' .:/.-.-_:\: ,'·_. ~
. . . . ' .
£xalllPle 2. . . . .. •,. "'. '., , . . '. . . ·. - .. , ·: _: :.
~ ~ f{1.f~ls.~ ~~ ~3:,TI ~ ~~ \~311 ~ 3~1~1 ..~
6()%, go%o?.ll 100% Tf{ 31 f<fl"~ (, 199'.·~ fl qIlij ~ qffi 6 ~ ~ ~-~ (11 il~I { ·
~~ ~ f"1 (( '' . ; ' ' ' .. ; ' ' .- .
A flexible budget at 60%, .80% and 100% Production Capacity is to be
re pared from following inf~rmation relating to the productive activities
f,upta Company Lt~. for_the six months ended 31 December, 1997. •.:.
of
ft:Wt ~ .' · ·-·· . ., . .. Rs. ·
. ·-
(Fixed Expenses) :
~o-l (Salar~es) · · · -- -- · 4,200
fctiUm q ~ (Rent & R~tes) _2,8~
' . ,_(, -
~ (Depreciation) - 3,500 ·
i . • . - , .• ~ 10,500
~-Qf<aJ~~~~0%8:T"@TQ1': __.--·
(Semi-Variable Expenses at 50% Capacity) :
~~-~ (Plant Maintenance) .. ,. 1,250
"
~a.l ~ (Indire'ct 't.ab.our) ·: :·, ,. · 4,950
fclfcltl ~ (Sundry E~pense~) · 1300
'
um
qf<aA.n,n~~so%~Q'l: .,,, -
- .· ;
(Vari~ble Expenses at 50% Capacity ) : . 1 .• •:

mlfITT (Materials} _ ,:·'. ·\. 12,000

Wl (Labour) 12,800
'.
fci~,<F~:;af~ cffi ~m {Salesmen's Commision)•
-, .. ,15,000
'. I • '

. . . . . ... -. 39,800
~-'lftq;~~fl('f ~ 40% p 70%_f fi~~ ~wr r,--~ ~- 110% q 85%
q:;r:f~ ~~~ 3 $ ~an
cfiT 10%/~ ~ t ss% q 100% cliT"lfaJl@T t~
~CK lfflan ~ 1s·%-ifl7iITml 1~~~t ft~an t-ml RWf R-m ~·, .-
~ 60%m~ tn: 60,000 ~., 80% r.fir.f~ lR 90,000 ~. ij?.ll 100% ffl~
~ 1,20,000 ;, i I . . · .- . · • . ., · . '. - .- ,.. .. : .•
Semi-Variable expenses remian con~~tm1 bt:IWr. ,e-n 400h an<l 701,) capacity.
! by 10% of the above figur~s ~70 fo &nd ~ capacity and
as,
0 creased

increased by 15% of the ~bo"~

fo?ures ~ 8~ 100, ca1:>atity. Fixed
expenses remain constant wh,,t(.•/1:1 Ult. ltUt\ cfa,li-'tl,.S~les at 60';{i capacity is
Rs.60,000, at 80~~~ capacity lS'. 9_
0,00O~-.fOOCX, t ,tp,..u:,ty Rs.1,20,000.
 f. .

Solu tion. Flexible Budg et

(For the Period of Six months ended 31 Dec., 1997.) ·· ·, .-.
Oper ation g Capacity
Parti cular s ',

60% Rs. 80% Rs.- 100% 'Rs.

,,
. '.

A Fixed Costs ,•
-~·..... ,

Salaries 4,200 4,200 4,200

Rent & Rate s 2,800 2,800 2,800
"
Depr eciat ion 3,500 3,500 3,500
.·
'

B
Total of A.
Semi-Variable Expenses
10,500
. .
10,500. 10,500
-
.
Plan t Main tenan ce 1,250 1,375 ,,

1,438
.Indir ect Labo ur 4,950 5,445 . 5,693
Sund ry Expenses 1,300 1,430 · 1,495
-

-
Total of A & B. 18,000 18,750 19,126
C V~riable Expenses
Mate rials 14,400 19,200 24,(XX)
Labo ur 15,360 20,480 25,(i(X)
Salesmen's Commission 18,000 24,000 30,CXX>
Total Cost (A+ B + C) 65,760 _82,430 . ,98,1'1i,
Pofit ( +) or Loss ( - ) - 5,760 + 7,570 + 21,274
Sales 60,000 90 000 · '. 1,20,CXXJ
'
Working.
1. Semi-Variable Expenses
At 60% level will remain constant.

'!'
2. Semi:Variable Exp. at 80% Level
. • -~.. , .
,1 :- Plant Maintenance Rs. 1,250 + 10% of Rs. 1,250 ·= Rs. 1,375 -
~. ·:. '~ ·
Indi~ect Labo ur . Rs. 4,950 +· 10%.of Rs. 4,950 _
·= Rs. 5,445. · . · ·: ; _., ·:~·: ·..
Sundry expenses · Rs. 1,300 _ 10% of Rs. 1,300 + = Rs~ 1,430 ·.-----.. ~
·:r -~
3. Semi-Variable Exp. at 100% Level _ ""
. , . ,, . ' I . , ,
. Plant M~~ ~tfna n~ ~:xp. Rs:,i t,250 + 15% of Rs. 1,250 = Rs.
1,438,-~: . .
Indir~ct·( ~b~u< ' ;•·; _ R (~~,?~0~itJp%
1

of Rs.-4,950. = Rs. 4,693 _·:·-. :·: ~:::~;

.Sundry Expenses · _Rs. 1~300:':t ::15% of R's~ 1,300. = Rs. 1,493
•
. ·< '. '._\:
' •' , .•_I . • ~
 ses ·
. 4. Variable Expen Capacity
60% 80% 100%
12,000 X 60 12,000 X 80 12,000 X 100
Mat eria l
50 -50 50
= Rs. 14,400 = Rs. 19,200 . . = Rs.24,000
12,800 X 60 ]2,800 X 80 . 12,8QO X 100
Lahou r 50 . 50
50
= Rs.15,360 = Rs. 20,480 = Rs.25,600
, 15,000 X 60_ 15,000 X 80 15,000 X 100
Sa lesm ~
en 50 50 50
,000
Co mmisio n = · Rs. 18 . = Rs.24,000 = Rs. 30,000 .•_.
' .
_
Example 3. tR ~ ff ii l< I< ~
~ ~ l1
00% ~
~~ 60% r.P.111
80%
~ ' g data for 80 % C ap aci~ prepar e a tl;xibJ~ b~dget fo
r
•With th e followin ty. _
60 % and 100% capaci [ ~ (capacity) 80%J
its Pro duce d) 800
$cfil$ ll i dc<-JIR d (1/n · Rs. 100 per unit
) ·. ·, .
fll Am (Materials
Rs. 50 per Unit
~ (L a bour) Rs. 20 per unit
~ i j ~ (Direc
t Exp.)
en ~~ s) Rs. 50,000 (40% fixed) , , ,, .. ... - .,,.

Exp .

ct~J< &HI ~ (Factory

. r.
d) •·

xp en~e s) Rs·. '"1,000 (60% fixe

SI ~IIfl ➔ aJ1i (Ad~in
ish"ation E
\
Flexible Budget .
SoJutio n. . Activity · · ' \· '
.. ..

(600 Units) 100% (1000 Units)

Particulars 60%
Rs. Rs.

·'
- '.

A. Semi-Variable Etpenses • 42,500 57,500

...
.. I!
44,00()-:'
Factory Expenses
, ...
36,000 '

enses . .
-Administration Exp ~

' ........ 78,500 · t,01,500

.. .. '• -. , ' . '.
,·.,_· ..
.. i ·'.'";._ ,
: ,:-;.=,·
..
~-

Total of A : ·,
1,
. J,:.. {' ,. ,

. :. .. ,. ·,.: •· I •
00,000 1,00,000
Variable Expenses ..
: . '
B. .. . .
-i
..
•·
.. "

: .
.f -
30,000 50,000
Materials . . '
·;'

: j.
1/ , ! :
.. 12,000 20,000
Labour {
·-·
:
..
,j' , .

Direct Expenses . 2,71,soo

~(

..
,
,. \80,500 .
'

+·s r· . ,
..
TotaJ Cost {A . ·• .; . ,.
 Working.
No. of units 60% 100%
800 X 60 = 600 800 X 100 _
80 80 ::: 1~
Semi ..Variable Ex1>enses
1. Factory Expenses
50,000 X 40 . ·. ' -:
Fixed 100 ~ Rs. 20,(Q) . . '

Variable Exp. at 80% level = Rs. 50,000 - Rs. 20,000 == Rs. 30,Q»
30,000 X 600 .:·
Variable Exp. at 60% level - - 800 = Rs..~
'
Se111i-Variable Expenses . • .. .

at 60% level ·= Rs. 20,000 + Rs. 22,500 ~ Rs.42,.t»

30,000 X 1,000 . Rs.. '. ·.·
Variable Exp. at 100% ~evel - · .· ·. . 800 -.. · . , J7
, ~ .~ .

,,
Semi-Variable Expenses .

at 100% level ·
Rs. 20,000 + Rs., _37,500 = Rs. 57;AJJ ·:
2. Administration Expenses

Fixed

Variable Expenses at 80% level -

'. 40,00<J x 60 =
100 · · - - ••. -·
Rs. 40,000 - Rs. 24,000 = Rs:t
R~--
' • J , ~ • •

,,. .
vana bl e Expenses a t 6001. 800x 600 -- n.. .
I I
-10 eve ..= -
. 16,000
~ -· · a

Semi-Variable Expenses ~t 60% le~~I ,_. . . ,',, . . ·-. ·,

= Rs. 24,000 + Rs. 12,000 = Rs. ,
Variable Expenses at 100% level · ~ 16,000 x l,OOO ~ Rs. ,: .
800 : ~~,.
Semi-Variable Expenses at 100% level \
= Rs,24,000 + Rs. 20,000 • R&i..
Example 4. · . ·::. '. ,;··: ·, :. _., ·f ::.;~,-~~~
.' . ~q-jj(&l-ilir.t,OOO~ifil$l/1' it-.dl'll<-l ~~clflf~~~~

f.
below~he Expenses budgeted for pr()duction of 1,000 units in a r•~~::,
~ . . .. ·.

r
1

/. · _·,. -~l_li!ft (Mat~rial) ,,. ._ •

. ·:.;.
· _>_:._, . _.,_: ··-~:-. ·... ~(Labour) _ .. ' ·-'
:'.:.~ ;;;:-,
,., . • • 1 ,' ', --"
~~-\~-~--\~ :--/~~·) ...
. ~--·' • • ,.

·,· : _,•'.,,•.
 r@q J~ ~fl (1 ~ (V~ riab le ove rhea d) . - ·:, 20
W. Tf~ (Fix ~d ove rhea d) . 10 ,
,.. ·.· .. '· 5'
~~ ~ (Di rect exp ense s) '

fq~h<-T ~ (Sel ling exp ense s) -(5,000 fixed exp.) .15

fcid {aJ ~ (Dis trib utio n exp ense s) {20% fixed) iO

>1~il tH cx:r.T (Ad m. exp .) (100 % fixed) . 6

' ., . 146

(3l) 800 ~,hf~ in·~ (~) 600 ~tfil ~ 4)' ~ d~ I~➔ ~~~~
ffi ~ r'-11 Q. o~
. .·
~W lTI : ~(' iPi ct cfilr\JfQ. I . . . . :

(b) 600 U_nits and

Prep are a Bud get for Pr6 duc tio~ of (a) 800 Uni ts and
··· ' · [Agra, B. Cum.~ 1992]
find the unit cost at each level. ···

Solu tion . Flexible Bu et ·

" 600 Units 800 Uni ts
. ·' .-
Rs. . Rs. .

A. Fixed Exp ense s .-: :: ... .,

Fixed Ove rhea ds ·., . ·· • · 10,000 10,000
6,000 6,000
Adm inis trati on Exp ense s ·
16,000 · 16,000
B. Tot alof A . .
Semi-Variable Expens~s · ·13,000
· Sell ing Exp ense s . · 110 00
' 8,40 0
Dist ribu tion Exp ense s ,., . 6,800 •
' ·, ~
•
- ..
i.

'.

37,4 00
Total of A +. ·a .-.. _:. ·• · :'{ :. ;_.
C.
Variable Exp ense s :·. _·. 40,000 -
Mat eria ls . --. ' . . : ·30,000
_18,000 ·. 24,000
Lab our
3,000 - 4,000
Dire ct Exp ense s · -.·.
12,000 16,000 ..
· Variable Ove rhea d . :· ·.:- ·

. 96,800 . 1,21,400
. . Total Cos t (t\ + }3, _+ : C)
·.
. 96,800 -·
, ,·400
121
,• I
.• r
• :_< -
" r •J '• ' •'; • , -;~• '
. . .

· .··cos t per unit , · · ·" ' • f • .. "' •• ..~ • i • ' 600

-.· ·:; r . . • ·- • .! '
 Working.
Semi-Variable Expenses :
1. Selling Expenses
Total = 1,000 X 15 = Rs. 15,00o
Fixed = Rs. 5,000. ·
Variable for 1000 units Rs. 15,000 - Rs. 5,00().. Rs. 10,000 ·
10,000 X 600 · .
Variable Expenses 600 units - lOOO . = Rs. 6,(XX)
Semi-Variable Expenses
for 600 units = Rs.5,000 + .Rs., 6,000 = Rs.11,000
..
_ 10,000 X 800 _ R .
Variable Expenses for 800 units - . 1 OOO - s. 8,000
'
Semi-Variable Expenses for 800 units
= Rs. 5,000 + Rs. 8,000 = Rs. 13,<XX)
2. Distribution Expenses
Total Rs. 1,000 x 10 = Rs. 10,000
/ .

Fixed 10,~ x 20 = Rs. 2,ooo

00
(
Variable for 1,000 units Rs.10,000 - .Rs. 2,000 = Rs~ - 8,000
8,000 X 600 _ R. . 800
Variable Expenses for 600 units
' .= · 1,000 - s. 4'
Semi-Var~able Expenses for 600 units
= Rs. 2,000 + Rs. 4,800 = Rs.· 6,.800
8 000 800 .·. ' . . _. _. ·: .
Variable Expenses for 800 unit~ = ' 1,000
X = Rs.6,400
. . :· · . I . _.

Semi-Variable Expenses for 800 units

= Rs. 2,000 + Rs. 6,400 = Rs. · 8,400 .·..::·'·.
Example S. . ..· .. .
1,000 $cfil~qf ~mlil~ ~~ {1i 1id f.Jqt I ~~ii;~% ~,~ -~
~ a~,~➔ ~ @(( oZJ7.iY -q' qRct J.:p,~ eacW' -qi ~ Tflri t 1 }: · .· ·: :... =

· The cost of an article of capacity level of 1,000 units is gi~en ~low,_~~~--··~

variation of 25% in capacity above or below thls level. The expenses var/--~ :
indicated in bracket. _ . ·. .. · · . ·.t·\', 1.
• -1 . ',, • • : • ~· •

. ,. . '
 : Rs. . ·, I .. • >• l
',,.,
..:.-; .',•
. ,,·
•;.,.?•
'
I •';

Material ,.. '. ,: ./ 5,000

.~ r ...
(100% Varying)
Labour . . : .,': :·:, ::• ·'. :· . _: ~ :_ 3,000
(100% Varying) · ,. :;
power . _{ 1 ,.) •· - ..... \·,t·: 300 (75% Varying) :
swres . · 1,500
Depreciation · . ·_·. ,· . 2,000 (100% Varying)
. (100% Fixed) ·'° .: '.'. _:.;
Selling Ov~rhead .· · ··: '. _· 2,500
.(25% Varying) . , · :
Admisn'istration Ov~rhead. . . 1,000 •• .

Total Overhead . _, _, . .
1
15,JQQ ( 100% Fixed) , -.r
Costperunit :. ·,·:-:_~.)-· ; ··: · ·.: ·15·30 ·· ,.- ';<.'~•_,.' :
800 ~cfil~<if 41,200 litil ~ 4f ~ 3i<11 ~Hi'R "CR~ <iii ~ WTo $1 .filf.;ro; I
Find the Unit cost of the Product at Production level of 800 uriits and 1,200.
Solution. ·· • Flexible Budget .
800 Units .._. .1,20~ ~nit~

.
A Fixed Expenses ·.. . .. ·.: .. •: ..,
Depreciation. -> ; ·:-"r :·_· :i.'}: '2,000 'i' ··
Administration Overheads . \. ·\ .. : i 000
' .... -'•·

' .

. .
Total,...units
Rs.·16 ·54. · 1
: 1·· .--..·, '
Rs; 14·48
Cost er unit . ·
Working.
1. Semi. Variable Expenses : ' ·
<i) Power

Fixed

Variahlc
• , . ,~ , r , •• •
 22
For 800 units -:·•· = Rs. 75 + ~ ~OO
. ·;.,_;_ = Rs. 75 +' -Rs. 180 = Rs. 255 : ' .

For 1,200 units -~·~: ,- = Rs. 75 + 225 X 1,200 ·.' ··· . .';
.' ,'. ; , 1,000 •; ' /,. ,. r/:
· = Rs. 75 + Rs. 270 = Rs. 345 ~
' t
',, ' ',i ' :; i ;~ I ' J o, •• • ' • : ,·

(ii) Selling Overeads "•"=;• 1 '

• ~- . •
"I
i
_ ,
~ ': - t ,<
'
; •

2,500 X·75 ···:·· ·, r,. .:... .•.

Fixed ~.: ··
100 , . .. Rs~1,~5 .
Rs. 2,500 - Rs. i,875 ,· ' Rs. 625 :_
• > ,•r•'
Variable · · ··
625 x 800' '.V • . · -. .
. For 800 units '. . . ,._ =Rs.1,875 + l,OOO . .. ,·. , · · ·, ':,
,. , ,,._ : ·. ,. . , Rs. 1,875 + Rs. 500 .:.· Rs:2,375
R 1875 + 625 x 1,200 ,· .. ,· '·,;· .:
. For 1,200 units •. , .• , ·.. ,·-L = .. S. 1·,.
•.• 1

' ' 1,000 . .,,~•: .. ,

.. ·: · _.., . , = R.s.' 1,875 + Rs. 750 = Rs. :2,c25 ·
2. Variable Overheads :
. 800 Units 1,200 Units.1 >..... ,
5,000 X 800 ,-,.:,.
· ·. . . ' 5,000 X 1,200 ,., .: > ,-,. ·,.:
Matenal l,OOO ;. .. : -~s. 4,000 , ...,1 000 ,,, .. , Rs. -6,.000 ·
. .. •· . . 3 000 X 800 , · 3,000
' X 1,200 = R:-, , , : ' :, ·
Labour ' l,OOO = Rs. 2,400 ' J. T
3 600
J,000-,...,.J :,1~: .- i~: ·' ,- ,". . . .J
I

Stores l,S~~
800
= Rs. 1,200 1,500 X .1,200 = Rs. 1~-800 : ~
, 1,000 , , .. -- , ·-·· ·.,
'; '
Example 6. · .. -. .. · · · ·' .. · . . '
T ~ I ~ 1 , " ' • • •• 1 ' ••-: .:''•· ' , '

Rl=J ti qct,f ~ 3ll~ 1R aq floq lt ~ ~ cl ift cl I ~ ~ ~Ail{ allT 70%, .

so%ail{90%~~~aqfloqlt ~ffi cfilAIQ;- . ,.:."•·~ ···•·•·.
Draw up a Flexible ij~dget for ~verhead expenses on the basis of. the
following data and determine the overhead rate at 70%, 80% and 90% Plant
Capacity. .-· • .
· ·· : .,,
,
~ '. '
.
...
•1
~
:• • • -~ ::. ; ,.-: ,:

• ..-1•

I 70% 80% , , 9(}% .·. •:•

: ~'ell @@PR . ··~'R . · .
, (~t 70%Capacity), (At 80%Capacity) (At 90% Canacity) ·'.· ..;_
· ·· · · Rs. Rs. · Rs. :.';~ i}_ ;·.::.:
qfiqd..ftftM ap.f: ' ,. " . ~ _,
-. :·-:
. ~ ~ ~ :..~ " . ) . -~ .... ~ . . .. ._.·--; } ·, _ -

(Variable overhead) : : J. ,."[ 'l ·~ ;• ·'.' :'

. '
·, .. . ~tfclflJ(~. ' . .·. . .

..:. . (Indirect Labour)c ··..... . .

i
. 12,000
.
- .. i~ ? •' ~ ~- .

'.
'Rllf (Stores)
. '

~ .. · ·~, ..: 4,000 : ' ,; ; :,, /';° ·.::. '

' '' : l' ~ -' - ~,•';~· ✓- -·- .. :-
 3r.l- qfiqJ~ ~ihwt ~:
.(Semi-Variable overh eads) :
:f
I l
' '
~(Po wer ). ~ '· .. '
(30% Fixe~ 70_% V,ariabJe) 20,000
lH'4a ciffi-H sllq . · · ~ - · j
I
'\:
lI
(Rep ~s & Maintenance) 2,000 , · i

(60% Fixed, 40% Variable) . ,_ i

. ,. r '

~
I < • ;

~ aqftc4<1: . · .
ff L •' } •• •_ f > ..

· · I ,
"

(Fixed overh eads) : I

1
~ (Depr eciati on)
11,000 ,
'. I;- • - - •,• : ,' ' •, :

~(In sura nce) 1

~ (Salar ies) _· · . :._•. · l
~ 34R&.4lf (Total ~ver head )~ . -
3l:(1i1Rd ~~WI~
II
j
; '
(Estim ated direc t labour$ hours .) 'f ,~~ •
- ..: ' !
,, ,.,, .... ,, l..l : -•~ (
1'
,
-,

Solution. , \ ., - · Flexible Bu t 1
,, 1"°--'8'1o . 80% ,· 90%
•.. { 1• :··.; Capacity··' · Capa city · ·Capa city !
,. · ·

R
I
R j.
• I •
A. Fixed Overheads ~.. . .. :-:.
"
. i
I
Dep~ eciati on .. , . 11,000 . . ·: 11,000 · ;': .:: .. 11,000 -~ ·- .I
Insurance · · . 3,000 ('' _. ·,3,000 ... • · · 3 000
i ; r·
•. , , I
Salaries .. -: 1--~·-:-10__,_ooo
___+-__1_0,_ooo_-+-___._1_0_,oo
!

...... , \ .
___o. I

!'
Total of A. '· ; , . 24,000 · ~. · ·24,000 i
l h 24,00 0 . I
B. Semi-Variable Overheads it I '
' . • ' ~ ; •• + ,, .. _ i
Power .. . . . -.. , , · _,:
" >'!l,
; ;.
"
.;,
·•· · 18,250 ::·,·,::···20,000 .> 21,750
Repai r & Main tenan ce
,.
.- >, . 1,900 .;:2,000 . --. · ·2,100 ·
44,150 .46,000
C. Variable Overh eads · ·
Indirect Labo ur :. . , · 10,500 : '· 1\ 12,000
13,500
Stores . .. '
i,,-

;; '• ' ''., ,,

-.,
.. ,·! •.' ··; l ·3,500 '>4,000 4,500 ·
Total Cost (A +B +C) . . 58,150 . 62,000 ' '. 658.SO
'
Estimated Labo ur h_;~rs ',.
. '<. ~. '.' .

.··1,08,500 · 1,24,000 · .·-1,39,SO(l

''
Overhead Rate per Labo ur Hour Rs. 0 · 536 Rs. 0·50 Rs. 0·472
 • • I \•' I

Working.
Semi-Variable Overhead :
(i) Power
20 ()()() X 30·. 'd·, ~\, ·:., . ·
, - Rs'
Fixed - · ,... 100 ·>-·· :;;-:,. ·_: ~-
', - 20,000 X 70 _ - _·: · -_ :·
Variable at 80% level ,·= 100 ·· - - .Rs. 14~ . t.a
14,000 X 70 . ".:, :',:·:.: -
=
Variable at 70% level ,'-' . ;, . .80 ', -=Rs.~
_,-~-, ,:,'.·, -.
Semi-Variable at 70% level = Rs. 6,000 + Rs. 12,250 7_ ~- 1~
· 14000.x9 0 _.. _.· - - -_
Variable at 90% level . = _'-80 _- - ~ ~s. _~~7~ .
= Rs. 6,000 +-Rs ..15,759 = R,s.'21,1,e -· - , ' ... ... ·' ' .. ;,·.j. ,.
• I l\ I t, i
. "
(ii) Repair & Mainten~n~e ~ -•_..;•~,·:l. ,•~:--•~.·.-

/ 2000X6 0 · ·· ·
Fixed · _, ·-, ._, = , =h 1,2m
. . ,. . . 100 . _ ..,.. ._ .. ·_. .-. _
';a··r-·1able at 8001..o··.1·evel. -~ -. . Rs. 2,000 ~ ·Rs.·1,200 = Rf · ·11
v, ·ic_ , 800 X 70 ::·.: · .• · ·;. - .
Variable at 70% level = · - 80 . _ :. Rs~ ·-.,-,
- Semi-Variable ~t 70 level
_
=' Rs."'1, 200 -Rs. 7oo - _ ~ -•
. . • •. , .~ .1.' -:.- : ,- .,
1

800 X 90 ·R :.: . ::.:: 9(1

+ -!.~
· Variable at 90% level:,. ···., ::·.? :·.-·. ·; ··;::.. · = 80 = 5• -
. ·), - ... ,- ,, . I
Se~i-va~i
,. ·
abl~ a-ta,-:•,··1 :90% level · •'. _ , · ,,
·_.1 == Rs. 1,200 _+.Rs. 900 = Rs. 2,ICI
.··,
1
Example 7.. .... - :_ .,,. __ ,.., .. --- -- · j
. _ .· _ _ . . . :.. __ :t1 • :- •, ' ' . ·, I.'' ... '"'" . , . • .. ,, •. , ' .. - .

~ cWl&Ht ct Jq 11 if so%_~ cfi1{ ~ ~ a?.IT 10,()()() -~q;i-~ tn:

· ~ ~ I cfiUHl ~m\11 tfiT di iq_ I~ ('-t I II~~ ~at fcfi 1.JW 60% a?.ll 80% ~ ·~ •' .
(l'-(l ~ fc.lllUfl ,:ft_'c!tf\J((l ,-_ -:·,:.>··~..
.; . : ·:··:,;;'.::< _:&li
A factory is cu~ently by working ~t 50% capacity and produ~
units. ~stimate the profits ·of the .company when it works at .60'1;.·
capacity and also give your comments. - .·. ._--_: :· > _. ' -- -'-.,.i /:' {, .;•
.. _60% ~ 1R ffl m .1R cliiift ij 1q ~ fflT@ 2% ill~ c1 ffl t
2% "Qc9f~ ~t I 80% ~cliiift ~,qJft ·~ffllra 5%
5% "« cfilJ ~ ~ f I . -: .- .--.. -. , ,
"'•tt lff
· , - · ,
' t ' •• ,. t. ,, 'f> ... " ' . '

At 60% working raw 'material cost hlcreases by 2% and 1

sellini
by 2%. At_80% raw 1t1aterial cos\ in~reases by 5% and selling price · .

"G~~~
_:·.-59% '1«1TT I~ffi1R ~ffllra'180l. !!fd~ t tlt'ff
------ .... . ,... : "' . . ,. ,, ' .· 200~;·,
''
"~I~•~•.•~ I - - . • . . .~ \ •. - • : /· '. · _ · _-. -_. ··:; ,.. _:i /:--ta,,< 1

-· --, At 5~% .- ~a~~city·~~rki~g, t~e Pr~d~-ct costs Rs, 180 ~r u~~--,,· ·,

Rs_. 200 per.....unit · :\ ,:, · ; , ;' ~· - ,-,., , \ · · · · , ,. . · .,-. · · ·- · - -. '
_ ... ,.,
_;,, ·' ... .....• .::. ---- . _-,_.·~- -.-'·-·:,,:::·-~:... ---, ·_·-, .
' , . ' ' :'· _, ::_: - _'_ ; ' ,' ·._-_ '., ,'

,'
\'..: '·,>... z- ; 't'."
!'••' ,, '. ,. ;i.... .,,.....,.,,~,... 4'1o_..-, •.➔•,-•-•.•.,~•
·' \ .,._•.;.
;:'., ~
cc,·r~;,,;.. ·.;.:.:,., ....-. ~
. •,,:•;.,l/. •• 'itl
~
.:• •'"
·.; ~
·; '-~':,,,-,:, ; ;· '.i'~
,i .. ~ ... ._.,/.....:• ...'1·:
,6,l_J JI'!-~•"'-· ·•
> -.r, _··.·•_''_·_\_'._~.'..·~-·.-.:_ ·.~-:-_~1~-~.·-·___:,·_, _·
~-~••• -- . . ....
 180 ~- lITTf ~ (11 .1d
1 f:P:l -~cfil <t -
·. '
:.... - '•,; ..

up as follows~ .., Rs. -

The Un it cost of Rs , 180 is 'made
. , ;., 100
~ f41¥t !ft (Raw Material}
·i ·. .- : ·· · •

, .-. , 30
~ (L ab ou r) ·_
3()
e ad ) (40% fix ed ) .
cfii<&11i aqf<oqq {Factory ov er h_ . 20
d) (~~~ fix ed ) ·.
ll~ll81 >3~ fl~ ll (A dm . °.~ erh ~a
'' --
180

Flexible ·Budget ·:: ·;

So lut ion .
- · ,.. 50% 60% 80%
:. .•, '

• • i• ...
- . ' ' • ·-•

,.;i :. 16 ,00 0 '. .

10 00 0 .:i. -12 00 0
' ' Un its Rs .
Un its Rs . Un its Rs > . ,_

,,
, 11· ,'.,., ; :·: .. _,:, ·~.
~ • , • • r
• '

A. Semi-Variable Ov er he ad s : ."-,4 ,08 ,00 0

' ,. 3,0 0,0 00 .3, 36 ,00 0
Fa cto ry ov er he ad s . · ' ' I " 2,6 0,0 00
2,00,000 2,2 0,0 00
Ad m. ov er he ad s { _; .
..
'r 6,6 8,0 00
;,... 5,0 0,0 00 5,5 6,0 00
To tal of A . .. _ ♦ • l ~
;

Variable Ov er he ad s : 12,24,000 :, _16 ,80 ,00 0

8.
Ra w M ate ria l ·!i . .. .. .. 'I ,1 •
, . ' > •
, 10,00,000
3.00.000, . 3.6 0.0 00 4.8 0.0 00
La bo ur . .' -.
'
28 ,28 ,00 0 ~
·'
' .~ . 4· . : • 'i •,(. 'f

18,00,000 21,40,000
I

To tal of ( A + B) (T o't-a l co._st) + 2,12,000

· ~..i{ / ~·· ;. ·'. .
+ :2,00,000 + 2,12,000
Pr of it ( +) or Lo ss ( ~) " •
1
' ,. "

...
20,00,000 23,52,000 30 ,40 ,00 0
Sa les
2,000.
-T he .Pr of its ·at 60 % & 80 % level is th e sa me i.e.; Rs . 2,1
Co mm en ts 80%~ Ho we vti r:,. in cr ea se ~o 60 %
cr ea se th e pr od uc tio n to
It is no t ad vis ab le to in . 12 ,oo o~ · . . . · ' ·~: ..
is go ing up .by Rs
is advisable as pr of it
: ·.;, ,. _,.,-,,: ::' · : .
\\'orking.
(1) Semi-Variable Ov er he
ad s: · · ' .' . ···. ,.'. :. ' i: " •:'. ,. '. . . .
·•"'· --'; . .
(i) Fa cto ry ov er he ad s ·
· = 10,000 x 30 = Rs·. 3~06,ooo • • •' ,,',--;_ • , :
Total 1 • , ,· ·, •
: . . .. ~
·3 ,00 ,00 0 X ,40 ~ R.·. . . ,
,. ' ,...

.. , ~-. .•./ . 100 - S,, l,2 0,0 00 ·

- .
' '..' < ' • . _
'l.';." i,_:v, -~ · _.:_ :·,~ '.-- ·· :-
·• Fi xe d · ·. . ..~.· :·, ,·:·,_j 1: t • ~ ,:· ... :!:;: _, · ..'
--~-'.) ... 1 • ;;_-~ S;'.'

, ~~ I t · ·:!• .' .- ~ ... • ( :: :- :;

· · ~ Rs. 3,00,000 - .Rs , 1,20,000
'<·
= Rs, ·1,80,00f)
· Variable
1
Fo r 12,000 un its , .. < RS. 1~;0,()00 + x l;, 00 0 J~~Q~
!.• ..

• • I
•. ; • .. ' ·.· . ,. .. _·· ., ·.
 For 16,000 units
= Rs~ .1,20,000-+ ··Rs. 2;88,~ =.Rs. 4,08,000
= Rs. 1,20,000 ·+ .1
. -
1
= Rs. 1,20,000 + Rs. 2,16,000 = Rs. 3,36,000

1' ~= X 16,000' ~·:,._: _ .:; :-s~: ·.

'

(ii) Administration overheads , ~: · ,. , ·.:-' : ~ i: :"-': :. :c· , : · · ,

Total = Rs. 10,000 X 20 = Rs.2,00,000
Fixed ,_ = 2,00,000 X 50_2..: R~.\:00,000
. , . ·- ,100 . : ; --~ :·. ,-r·
Variable .,, .:.. Rs. 2,00,000 ,.:.: Rs. 1,00,000 = Rs. 1,00,000
For 12,000 units = Rs. 1,00,000 + Rs. 1,20,000 = Rs. 2,20,000
For 16,000 umt. s -- R s. 100
, ,000 + . l,OO .l0,O,OOO
OO _X .16;• ~
000
...., ~ ..- ... • .:j_'
-

~~ ....
: = Rs. :\,00,000 + Rs. 1,60,000 = Rs. 2,60,000
' ·- ,,.-·
.

(2) Variable overhe~ds : . · .' ; · , _.

.(i) _Ma teri als :·: ; ! I -~:; .- •• , •_; __;'
. - ' ., ..
. -For--10~000 miits . - . -:.- -- ... . ·;·
I
. 10,000 >(:100 = Rs.:10,00,000
Fo.- i2,ooo units ,.:-_
>· ••.,•-..
= Rs. 12,000 x 100 ·· ·~
I
·: · · · '-·'. __. -~
-

}· - - · (_= Rs. 12,00,000 + 2% of Rs. 12,00,000

,
I
• ,I .. ,,

( -~ .... - -·, ... -- -

... ·,..
', · = ·Rs . 12,00,000 + ~~- 24,000 :-: Rs~ izi4 ,00 0;
For 16~000 units.;.: · : ·· -i Rs. 16,000 x 100 ·::• · · '' ":": ·•' --- , •i
; ~-

•
-':rs~l6,90~?9°:t.5~
,• • • • _l .. _ ,
.'

ofR~~~6,0<?~~ .· • _· A _ ,_, ,-/·

= ·Rs. 16,00,000 +· Rs. 80,000 = Rs. 16~80,000
• • •. •t _: ;~. •

~. I , I '., I ' • I " ' •

•

(3) Sal es · · ' J

.. , - . ; '. l •1 ' •: ,'.: ,

For 10,000 units ---·· ~ · - ·· == Rs. 10,000 .x 200 ~ Rs~ -20,00,000 --_- -
: For 12, 000 uni ts: ,, ·_ ,__ '. -=. ·.· • :- _--- , . • _ . • · __ ;·• • . :~
1 -·· ,- •.
S~lling Pric e . .· _; 200 .- 2% of Rs. 200 ~, _;-; f, ·._, , • · • ·'

Rs. 200 - Rs. 4 == Rs. 196 Per unit

·:_·. · ·' · ·
Total Sales for 12,000 units = Rs. 12,000 x 196
_For 16,000 units·
Rs. 23,52,000 ;· _- _' =
Selling Price ,: . = Rs.200 - 5% ofRs~·200 , .••,, , · :,:·,:-:
' I •
,_ = Rs. 200
.
- Rs.'10 _· = Rs.· 190 ,pe,~·' uni f: ·:
. Total Sales for 16,000 units . . . . .

' .
= Rs. 16,000 X 190 ~ Rs~ 30,40,000 . · ,. ·
.. . . ,.
' ·, ' . . . . '. . ~·-_;·. ': ,,·' . /"' .. :