I.

A factory is currently working at 50% capacity and producing 10,000

units. Prepare a Flexible Budget and estimate the .profit at 60% and 80%
capacity.
At 60% capacity, cost of raw materials increases by 2% and ~elling price
falls by 2%. At 80% capacity, cost of raw materials increases by 5% and
selling price falls by 5%.
 At 50% capadty, per unit cost oft 180 is made up as under :
(i) Materials t 100
(ii) Labour t 30
(iii) Factory Overheads t 30 (40% Fixed)
(iv) Adm . .Overheads t 20 (50% Fixed)
(v) Selling Price t 200 per unit.
Ans. Profit at 60% t 2, 12,000 and at 80% t 2, 12,000.

2 Prepare a Flexible Budget for the Production at 80 percent and 100 percent
capacity level from the following information ofSur esh Industries at60%
activity level :
(i) Production at 60% activity ouu unns
(ii) Material ~ 100 per unit
(ili) Labour(direct) f 40 per unit
(jv) Other Direct Expense~ f 10 per unit
(v) Factory Overheads f 40,000 (400/o Fixed)
(vi) Administrative Expenses f 30,000 (600/o Fixed)
(vii) Selling an~ Distribution Exps. f 20,000 (l 00% Fixed)
(viii) Selling Price f 300 per unit
.
Ans. (i) At 80% capacity : Total cost -f 2,22,000, Profit ? 18,000
(ii) At I 00% Capacity : Total Cost : ? 2,64,000, Profit ? 36,000.
3. Prepare a Flexible Budget for Manoj Industires at 70% and 90% activity
levels from the informations given below :
(i) Production capacity 80%
(ii) va·riat,le over~eads :
~
(a) I,idirect Labou r 12,00>
(b) Indirect Material 4,00>
(iii) Semi-variable overheads :
(a) Power (70% variable)
20,000
(b) Repair and Maintenance (60% Fixed) 2,000
(iv) Fixed overheads :
(a) Depreciation 11,0CIJ
(b) Insurance 3,0CIJ
( c) Others 1o,00)
(v) Sales _ 80,000
A~s. (i) At 70% capacity : Total Cost : ? 58,15 0 and Profit f 11,850 (ii) At
901/o capacity : Total Cost : t 65,85 0 and Profit f 24, 150.
4. The bu~geted expenses of Sanjay Manu factur ing Comp any Ltd. for the
production of 10,000 electric rnachines are as follow s :
 Particulars Cost per Unit ro
(i) Direct Material 00
(ii) Direct Labour 30
(iit) Direct Expenses ._ 20
(iv) Factory overheads (Variable) · · 25
(v) Factory overheads (Fixed) 15
(vi) Admi_nistrative Expenses (Fi?Ced) 5
(vii) _Distribution Expenses (50% Fixed) 5
Total Cost 160
Selling price 200
Prepare a Flexible Budget for the Production of6.000: 7_000 and 8,000 units.
-,
Ans. Total Cost:~ 10,50,000; ~ 11,87,500; f 13,25,000 .
Profit:~ 1,so,000; ,2,12,soo; ~2,75,ooo.
5. The following are the budgeted expenses of Kiran Industries at the 60%
activity level (60,000 units). Prepare a Flexible Budget for 70% and 90%
capacity-levels : .
Costs : (A) Direct Cost : f
(i) Direct Material 1)0,000
.(it) Direct W~ges 3,00,_000
(fu) Other Expenses (Direct) 60,000
Prime ·c ost (A) 4,80,()()()
(B) ·iariable Overheads: t
(i) ~onsumable Materials · 15,000
(it) Shop Labour 6,000
(iii) Maintenance and Repairs -8,ooo
Total Variable Overheads (B) 29,000
Fixed Overheads :
(i) Inspection l,(i()(}
(it) Depreciation 10,000
(fu) Insurance 5,000
(iv) Salaries 6,000
Total Fixed Overheads (C) 22,600
Total Cost (A + B + C) 5,31,600
Profit 68,400
Sales 6,00,000
Ans. Capacity Level Total Cost Profit
700/o ?6,16,433 t83,567
900/o ?7,86,100 ? 1,13,900
6. Prepa re a FJexib]e Budget showing profitabi1ity of Jag Mohan Limfred for
60%, 70% and 80% capacity Jeve]s from the following informations :
(i) Variable Cost ~ 3 per unit
(ii) Semi-Variable Cost
(a) Fix~d ~6,000
(b) Variab]e ~ 0.50 per unjt
(iii) Fixed Cost~ 20,00 0 at present capacity level of 50% (5,000 units)
and~ 24,00 0 estim ated at 80% capacity. ·
(iv) Selling Price ~IO per unit
What will be the effect on profit if selling price is reduced by I 0%?
Ans. (i) Total Cost~ 47,000; ~ 50,500; ~ 58,000
- (ii) Profit ~ 13,000; ~ 19,500; ~ 22,000
(iii) If selling price is reduc ed by I 0%, the profit wil1 decreased from
~ 13,000 to~ 7,000 at-60% capac ity,~ 19,500 to~ 12,500 at 70%
capacity
and~ 22,00 0 to~ 14,000 at 80% capacity level.
7. Fro1n the following informations of Utsav Udyog Ltd. prepa re a Flexible
Budg et at 60% and 80% activity levels :
~ 100 per unit
(i) Material
(ii)La bour . ~ 31 per unit

(iii) Facto ry overh eads ~ 30 per unit (40% Fixed)

(iv) Admi nistra tive overh eads ~20 per unit (50% Fixed)
( y) Produ ction Capa city 50% (10,000 units)
~ 200 per unit
( vi) Selling Price
At 60% capacity, cost of mater ial increases by 2% and se Hing price
decre ases by 2%. At 80o/01capacity, cost of material increa ses by 5% and
sellin g price falls by 5%.
Ans. Capa city 6()0/o · 800/o

(i) Total Cost (~ 21,52,000 28,44,000

(ii) Profit (~ 2,00,000 1,96,000

8. Prepa re a Flexi ble Budg et from the follow ing infon natio n ofRa mjila l &
Sons show ing estim ated sales, ~osts and profit at 60%, 80% and I 00%
levels of capacity. Assum e that all items produ ced are sold.
Cost (At 50% capacity level)
Fixed cost: ~

(i) Mana geme nt Salar ies 4,20,000

(ii) Rent and Taxes 2,80,000
(iii) Depre ciatio n on Mach inery 3,50,000
(iv) Sund ry Offic e Expe nses 4,45,000
14,95,000
 Semi-variable Cost :
(i) Plant Maintenance 1,25,000 .
(ii) Indirect Labour 4,95,000
(iii) Sundry Expenses 2~75,000
8,95,000
Variable Cost:
(i) Material 12,00,000
(ii) Labour 12,80,000
(iii) Salesmen's Commission 1,90,000
26,70,000
Semi-:-variable expenses remain constant between 40% and 70% activity
level, increase by I0% of the above figures between 70% and 80% activity
and by l 5%'of the above figures between 80% and 100% capacity. Sales
at 60% capacity ate f 51,00,000; at 80% capacity are f 68,00,000 and at
100% capacity are f 85,00,000.
Ans. Capacity 6()0/o . 8()0/o 100'%
Total Cc,st (f) 55,94,000 67,51,500 78,64,250
. Profit or Loss (f) -4,94,000 +48,500 +6,35,750
-Sales(~) 51,00,000 68,00,000 85,00,000
9. rhe Budgeted expenses for the production of I 0,000 units in a factory are
as follows: I •

Particulars Cost per unit Cf)

1. Material 70
2. Labour 25
3. Variable overheijds 20
4. Fixed overheads (f 1,00,000) · 10
5. Variable expenses (Direct) 5
6. Selling expenses (10% fixed) 13
7. Distribution expenses (20% fixed) 7
8. Administrative expenses (f 50,000) 5
Total cost per unit 155 ·
~repare a Flexiable Budget for production of 8,000 and 6,000 units
respectively. Assume that administrative expenses are rigid for all levels
of production. Also calculate Per Unit Cost.
Ans. Total cost per unit for the production of 8,000 units- ~ 159.425
and for the production of 6,000 units - f 166.80.
,Total cost for-
8,000 units- f 12,75,400
6,000 units- f I0,00,800
 -
concern for
10. (a) The monthly. budgets for manufacturing overheads ofa
two Jevels of activity were as under :
(A) Capacity (j()0/4 100%,
(B) Budgeted production (units) 300 500
(C) Insurance (~ 3000 300)
(D) Wa ges (~ 3(j()() (i(XX)

(E) Consumable Stores (t) 4500 7500

(F) Depreciation ~ ,. 12000 12000
(G) Maintenance (t) 3300 4500
(H) Power and Fuel (~ 4000 5000
l cost per unit
Prepare a Flexible Budget for 85% capacity and find the tota
% capacity.
segregated into fixed and variable cost at 60%, 85% and 100
14,500 at 5000
(b) The budgeted cost for electricity (a semi-variable cost) is f
per month, if
units per month and t 17,000 at 6,250 units of production
much amount
37,500 units are to be produced for the coming rrionth, how
should be budgeted for electricity ?
Ans. (a)
6()0/o 85% 100°/o
Capacity Level
11,400 . 16,150 19,000
(i) Variable Co st~
19,000 19,000 19,000
(ii) Fixed Co st~
30,400 35,150 38,000
(iii) Total Cost (~
1.01.33 · 82.42 . 76.00
(iv) Cost per Uni t(~
(b) ~ 79,500 (Fixed cost4,500 + Variable cost 75,000@
2 perllllit)
\

s is given under' A'

11. The cost of an article at a capacity level of 10,000 unit
the individual
below. For a variation in capacity above or below this level,
expenses vary as indicated in 'B' below :
A B

(i) Material 50,000 100% varying

(il) Labour cost 30,000 100% "
(fu) Power 3,000 80% "
(iv) Repair and Maintenance 3,500 . 80o/o "
(v) Stores 2,000 · 100% "
(vi) Inspection 800 25% "
(vii) Depreciation 10,000 100% "
(viii) Administration overhead 3,600 25% "
(ix) Selling overhead 4,500 50% "
1,07,400
Cost per unit 10.74 -
 Find th~ unit cost of the product under each individual e~penses at
production level of 8000 units and 12000 units.

An~. Total cost at 8000 .units capacity level- , 87,290 (Fixed , 6850
v~table' 80,440), ~rumtcost, 10.91, at 12,000 units total cost, 1,27,510
(Fixed, 6,85.0, Vanable, 1,20,660), per unit cost, 10.62
12. Draw up a Flexible Budget for overhead expenses on the basis of the
following data•
and. detennine the overhead rates at 70%' 80% and 90o/c0
plant capacity. ,.
At70% At80% At90%
Capacity Capacity Capacity
~ m (~
(i) Variable overheads :
(a) . labour
. Indirect 12,000
(b) Stores including spares 4,000
(ii) Semi-variable overheads :
(a) Power (30% fixed 70% variable) · 20,000 -
(b) Repairs & Maintenance
(60% fixed, 40% variable) 2,000
(m) Fixed Overheads :
(a) Depre~iation 11,000
(b) Insurance 3,000
(c) Salaries 10,000
Total overheads 62,000
(iv) Estimated direct labour hour 1,24,000
(v) · Sales 80,000
Ans. Capacity Level 700/o 8()0/o 9()0/o
Total overhead (inf) 58,150 62,000 65,850 .
Profitro 11,850 18,000 24,150
Sales('} 70,000 80,000 90,000
Labour Hrs. 1,08,500 1,24,000 1,39,500

13. Shiv Adarsh School has a total of .150 students consisting of 5 sections
with 30 students per sections. The school plans a picnic around the city .
during the week and to places such as the zoo, the amusement park, the
planetorium etc. A private transport operator has come forward to lease
out the buses for taking the students. Each bus will lave a m~irnum
capacity of 50 excluding 2 seats reserved for the teacher accompanying
the students. The school will employ two teachers for each bus. Paying
them an allowances off 50 per teacher. It will also lease out the require
number of buses. The following are the other cost estimates:
 Cost Per Student
(Q. Breakfast t5
(ii) Lunch ~10
~ Toa ,3
(iv) Entrance fee at Zoo ~2
(v) Rent for bus t 650
(vi) Special pennit fee for bus t 50
(vii) Block entrance fee at the planetorium t250.
(viii) Prize to students for games t250
(tx) No cost are incurred in respect of the accompanying teachers expect
the allowance oft 50 per teachers.
Prepare a Flexible Budget estimating the total cost for ·the level of 30, 60,
90, 120 and 150 students and showing each item of cost separately also
compare the average cost per student at these levels .

.
Ans. • · Level of Students (in No.) ·
Cost int 30 ro ro 120 150
(A) Variable cost 600 1200 1800 2400 300)

(B) Semi-variable 800 J(JOO 1600 2400 2400

(C) Fixed cost . 500 500 500 . 500 500
Total cost (A+ B + C) 1900 3300 - 3900 5300 5900
Cost per unit 63.33 55.00 43.33 44.17 3933
Students

14. The per unit cost of a standard product produced by Sumit Limited is as
follows:
~
(i) Raw material 18
(ii) Direct Wages 10
(iii) Direct Expenses 2
(iv) Variable 3
(A) (Marginal Cost) 33
(B) Fixed Overheads 2
(Total Cost) 35
Capacity Level I00 % ( I 0,000 units)
Selling Price~ 40/-
There .is a possibility to increase in fixed overheads for ~ 20 ' 000 if the
company increases its production more than capacity. This cost increases
 the capacity upto 15,000 units other expenses will remain constant ~;;I
yo_u s~g3g8e/st the company to accept the proposal of 15,000 units at s~Hing
pnce, -.
Ans. No because Total Profit will be reduced from~ 50,000 to f 35,000 if
company accept the new proposal. Hence company should not accept
the new proposal.
15. T~e s~les manager of ~-R. of company assures the company that if the
pnce 1s reduced ?Y 101/o, the sales of the company will be increased by
30%. On ~he basis of following informations of the company relating to
60% level of capacity with current sales~ 60,000, Prepare a statement of
sho:"ing ~perating_ profit at 60% and 90% level at current and proposed
sellmg pnce and give your opinion-:
Inforination :
(i) Selling Price-~ 10 per unit.
(ii) Variable Cost~ 3 per unit.
(iii) Semi variable cost~ 6,000 Fixed Plus~ 0.50 per unit variable.
(iv) Fixed cost~ 20,000 at current level and additional increase~ I0,000 at
90%leveL ·
Ans. (i) Operating_profit at 60% level f 13,000 and at 90%·level~ 22,500
(at current price). · · ·
(ii) Operating Profit at 60% lev~l t 7,000 and at 90% level t 13,500
(at Proposed Price) ·
If the company reduces I 0% selling price the current operating profit at
current price t 13,000 increases by t 500 at 90% level of capacity the
•
proposal may be accepted.
Operating Profit at Current Prices at 60% is . f 13,000
Operating Profit at Current Prices at 90% is f 13,500
Proposai accepted· due t-0 net increase in operating profit f 500
16. The infonnations relating to an examination conducted by a state public
service commission in 2017 for the selection of suitable candidates for
the post of Administrative officers are as follows :
Information · Year2017
(Amount in~
(A) Fees Collected from 4,000 students 4,00,000
(B) Cost:
(i) Valuation of Answers Books 1,60,000
(ii) Remuneration of Paper Setters 10,000
. (iii) Printing charges of Question Papers 80,000
(iv) Rent of Building and Furnitures 15,000
(v) Honorarium to superintendent 10,000
 (vi) Remunera tion to Invegilators
@ ~ 100 per day for two days
for every 50 students · 16,000
(vii) General Expenses Fixed nature 12,000
Total Cost (B) 3,03,000
Budgeted Income (A- B) 97,000
In the year 2018, it is expected that 8,000 candidates will appear in the
examinat ion. Hence, the rent of building and furniture and General
Expenses will increase by~ 5,000 and~ 3,000 respectively. Calculate
Budgeted Income for the year 2'01 s·with the help of flexible budget.-
Ans. Budgeted Income for the y~ar 2018 will be~ 2,33,000 (Budgeted t~tal
Income~ 8,00,000, Marginal Cost~ 5,12,000, Fixed cost t 55,000)
1. Prepare a Master Budget of company for the next year from the f~llowing
figures:
(A) Sales f I0,00,000
(B) Costs:
(i) Direct Material Cost 50%ofSales
(ii) Direct Wages 25 workers@ f 120 per month
(iii) Factory Overheads :
(a) In~irect Labour
(i) Works Manager @ f 500 per month
(ii) Foreman@ f 300 per month
(b) Stores and spares 3%on Sales
(c) Depreciation on Machinery f 15,000
(d) Light and Power ?6,000
(e) Repairs and Maintenance f 10,000
(f) Sundry Expenses I 0% on direct wages
 (g) Administrative, Selling and
- Distribution Expenses ~20,000
(h).Interest from Investment ~ 10,000
(i) Provision for Tax ~50,000
(j) Dividend ~ 1,00,000

Ans. Gross Profit f 3,89,800; Net.Profit after Tax~

3,29,800; Retained
profit ~ 2,29 ,800. ·
a manufacturing
2. The following details are available from the record of
concern regarding budget figures for 2018 :
(a) Budgeted sales 1000 units @ ~ 100 per unit.
(b) Budgeted Production Cos t:
Materials f 40,000; Labour Cost~ 15,000 and
Factory ove rhe ads ~ 5,000.
(c) Budgeted Ad~inistrative overheads~ 12,000.
(d) Budgeted selling overh~ads t 8,000.
(e) Appropriations: Taxes t 10~000; Dividend t 7,000
and
Transfer to Reserves t 3,000.
Prepare the Master Budget for the year 2018.
Ans.,.Net Profit before Appropriations (20 ,00 0 and
After Appropriation
NII. ·
'

- 3. A com pan y's nex t yea r Ma ster ~ud get ·is bas ed on the following
infonnation :
0.
(1) Sal es: pro quc tA t 3,00,000, ProductB t2,00,00
(2) Direct Material Cost : 60 percent of sales.
(3) Direct Wages : 25 worker at~ 110 each p.m.
(4) Factory overhead :
(i) Indirect lab our -4 workers at~ I 000 p.a.
(ii) Con sum abl es- 2% on sales
(ili) Depreciation current yea r~ 15000
purchased
(iv) Moreover a new machine cos ting ~ 20,000 was
Depreciation ·@ I 0% other expenses are :
20,000
(v) Factory salaries
2,000
(vi) Light and power
2,000
(vii) Repair and Maintenance
(viii) Sundries 10% on Direct wages.
00.
(5) Selling, distribution and administrative expenses~ 15,0
be given for
(i) 48 hours per week is worked, but allowance are to
3 weeks per annum for statutory holidays.
 (ii) Wee~I_Y loss of 6 hours production time per man due to machine
repa1nng and lack of work. ·
You are required to prepare company's Master Budget.

Ans. Net Pfofit "94,303,

Variable Direct WageJ 33,000 - ( 1904 +4125) ='26971
4. A glass manufacturing company requires you to prepare and present the
Master Budget for the next year from the following information:
(A) Sales:
(i) Toughened glass "3,00,000
(ii) Bent toughened glass "5,00,000
(B)Cost:
(i) Direct material cost 600/o of sales
(ii) Direct wages 20 worker@ f 150p.m.
(iii) Factory overhead :
1. Indirect labour:
· (a) Work manager f 500 per month
- (b) Foreman t 400 per month
2. Stor~s & spares 2% on sales
3. Depreciation & Machinery . f 12,600
4. Light & power ~5,000
5. Repairs & Maintenance f 8,000
6. Other sundries 10% on direct wates
(iv) Admi~istration, selling and distribution expenses "14,000 peryear

Ans. Works cost 5, 76,000, Gross Profit 2;24,000 and Net profit 2, 10,000
5. Mrs. Nirmla Manufacturers produces two types of product 'Uma' and
'Pushi' and sells them in the markets to Jaipur and Delhi. The following
. the current year :
information is made available for
Market Product Budgeted Sales Actual Sales
(A) Jaipur (a) Uma 400 units@~ 9 500 units@ f 9
(b) Pushi 300 units@ f 21 200 units@.f 21
(a)Uma 600uni ts@f9 700 units @ ~ 9
(B)Delhi
(b) Pushi 500 units@ f 21 200 units@~ 21
 Market research reveals that product Um~ is popular as i~ is under-
priced. It is observed that even if pric~ of product 'Uina' is increased by
f I, it will find a ready market. On the other hand, Product 'Pushi' is over-
priced and market could absorb more units if its selling price is reduced to
f 20. Manag~ment has agreed to give effect to the above price changes.
On the above basis, the following estimates have been prepared by sales-
manager.
(% Change in Sales over Current Budget)
Product Jaipur Delhi
(a)Uma +JO% +5%
(b) Pushi +20%,. +10%
'
With the help of an intensive advertisement campaign, the following
additional sales above the estimated sales of sales manager are possible:
Product Jaipur Delhi
(a) UJlla 60 units 70 units
(b) Ptishi 40 units 50 units
You are required to prepare a Sales Budget incorporating the above
estimates.
Ans. Area-wise: Jaipur- .f 13,000; Delhi- f 19,000; Product-wise:
Uma-f 12,000; Pushi-f 20,000.

6. There are two divisions in a company each consisting of two areas North
and South. The ·company produces and sells two types of products X
and Y. Budgeted Sal~s of a division for the six months ended 30th June,
2017 .in each area is as follows : ·
· North ~ . X l,000Units@f 10/-
y , 600 Units@f 6/-
South X 1,200 Units@f 10/-
Y l,000Units@f6/-
Actual Sales for the period was :
North X 1,100 Units@f 10/-
y 700 Units@f 6/-
South X 1,250 Units@f J0/-
y
.
•'
1,000 Units@f 6/-
 es could be budgeted
from th~ Salesmen's ~eport it appears that the Sal :
for the six months ending 30th June; 2018 as fo11ows
X increase of200 Units over June 20 J7 Budge
ted
North
Y " . I 00 "
North X " 160 "
y 80 "
l result in additional
It was estimated that proposed sales campaign wil
s of 140 Un its _of X in Sou th and 60 Units of Y in North area. Prepare
sale
giving Budgeted and
Sales Budget for six months ending 30th June, 2018
7.
Actual Sales for six months ended on 30th June, 201
, Product-wise X -
Ans. Areawise : 'No~h f ~ 6,560, South ~ 21,480
f 27,000 andY...:._ ~ 11_~040. .
ts, nameJy; A, B and
7. Beena & Company produces three types of produc
0 Units, B--37,000
C. The sales forecast for these products are A- 42 ,50
its and C - 44, 500 Un its. The estimated require ments of inventory at
Un
the Budget period are as follows :
Products
A B C
.8;100 6,250 9,700
1st January (Units) ·
10,500 6,100 13,500
31st December (Units).
You ar~ required to ~raw a Pr<:Jquction Budget.
36,850;-C -48 ,3~ 0.
Ans.-Budgeted units of Production: A -· 44,900; B--
Godre j com pan y plans to sell l,08 ,qo o units of a product "Sumit' in
8. The
00 units in the third
first quarter; 1,20,000 units in second quarter; .1,32,0
00 units in the first .
quarter; 1,56,000 units in fourth quarter and 1,38,0
the first quarter of the
quarter of the following year. At the .beginning of
pany plans to.have
current year, there are 18,000 units in stock. The com
the next quarter. How
an inventory equal be one-sixth of the sales for
of the current year?
many units must be manufactured in each quarter
Quarter· I Quarter II Quarter_III Quarter IV
Ans.
1,10,000 1,22,000 1,36,000 1,53,000
Production
Budget (Units)
9. From the following infonnations of Chand Brothers, pre.pare a Production
Budget:
(i) Sales Forecast Units
Product:
X 90,000
y 1,20,000
z 1,30,000
(ii) Stock of Inventory 1st January 31st J)ec~mber
Product: (Units) (Units)
X 12,000 15,000
y I•
16,.000 12,000
z 26,000 22,000
. 93,000 units, Y- I, I 6,000 unit~;
Ans. Production Budget : X-
Z- _1~26,~00 units. _
10. The sales division of Shya01 Enterprises has prepared the following
. forecast for the next year :
Product Sales forecost
(in units)
A 5,00,000
B 3,50,000
C 6,00,000
Production will remain equal in every month. The stock of finished goods
and work in progress .,have been decided in the following manner.
Product Finished goods · Works in Progress
Opening Closing Opening Completed Closing Completed
(Units) (Units) (Units) % (Units) %
A 22,000 28,000 60,000 75 48,000 ro
B 12,000 8,000 ~6,000 ro . 40,000 70
C .27,000 25,00050,000 ro 64,000 75
Prepare a Production__Budget for the next year
Ans. Production Budget for the next year
(in units)
Product A 4,99,400
B 3,52,400
C 6,06,000
Total 14,57,800
11. Pareek Ltd. produces two types f fi
foliowing (quarterly) informationt ans-. DeJux and Janta. From the
year 20 18. . ' prepare its Production Budget for the
·Sales (in Units)
Q.I Q.D Q.IV
2000 Q.DI
Defux ' 1,500 1 000 5,000
Janta I0,000 8,000 6, 2,000
Budgeted Closing Stock (in Units) ,000
Q.I Q.D Q.IH Q~IV
Delux 500 400 200 500
Janta 2,000 1,500 1,·000 2,000
(MDS• • • Un~., BC . om. Pt III, 2003)
Ans. Fans Qr. I Qr. II Qr. III Qr.IV
(in Units) Delux 2,500 1,409 800 5,300
Janta 12,000 7,500 5,500 3,000
. .
12. The informations given below are ~elated to Vinit and Vitin Brothers :
Cost f
0
(i) Direct Material 80,000
(ii) Direct Labour 1,00,000
(iii) Direct Expenses 20,000
(iv) Production overheads:
Fixed 50,000
· Variable 80,000
20,000
(v) Pr.oductio.n (units)
The Production Manager anticipates the following changes in the
forthcoming year :
(a) The average rate of direct material will fall from f 4 to f 3 per unit.
(b) The average rate of dir~ct labour will fall fro~ f -S per hour to f 4 per
hour.
(c) Direct expenses will increase from f I per unit to f 2 per wiit.
(d) Production will increase by 10% due to increase-in sales forecast.
(e) Other expenses will remain unchanged.
Prepare a Production Cost Budget.
Ans. Production Cost Budget-? 3,36,000 (For 22,000 units).
l3. From the following informations of Prem Products Limited, prepare a
Production Cost Budge~ :
(i) Production estimates- 12,000 units for next year
 (ii) Cost per unit-at 50% level of activity (10,000 units)
(a) Direct Material ,4
(b) Direct Labour f6
( c) Direct Expenses fl
(d) Production overheads :
Fixed f5
Variable f2
Total Cost Per Unit =f 18

The finn anticipates the following changes in costs in the next year:
(a) Labour Cost will increase from f 6 per unit to f 7 per unit.
(b) Material Cost wil I decrease from f 4 per unit to f 3 per unit.
(c) Production efficiency is anticipated to decrease by 5% due to labour.
:(d) Other expenses will remain unchanged.
Ans. Production Cost Budget- f 2, I 0,200 (Material f 36,000; Labour
(12,000 units x f 7 = f 84,000 + 5% = f 88,200; Direct Eif,enses f 12,000;
Production overheads : Fixed f 50,000 and Variable f 24,000).
14. The informations given below. relates to Sita Ram Ram Prashad &
Company: . I

(i) Sales Forecasts for next year - 77,000 units

(ii) Units of Raw-material required for the production of one unit :
.
Raw Material A 2 units
B 3 units
C I ,u nit
(iii) Estimated stock of inventqry in forthcoming year :
Stock of Inventory On I st January On 31st December
(Units) (Units)
(a) Finished Goods 7,000 10,000
(b) Raw-Material A 10,000 12,000
B 12,000 8,000
C·· 6,000 7,0CIJ
(iv) Cost of Material A ·, - f 5 per unit
" B - f 4 per unit
" C - f 6 per unit
 prepare a ~a~erials Bu~get ~nd Materials Cost Budget. ·
Ans. Material~ Budget in units : A- 1,62,000 units, B- 2,36,000 units;
c- 81,000 units.
Materials Co~t Budget:
A f 8,10,000
B f9,44,000
C f 4,86,000
l5. A Material Budget is required by Amit Ltd. which is to be based on the
Production B~dget. There are three.departments in the factory through
which each of_ the products are processed before being transferred to
fn;iished goQ~. ~_t91:e ...T~e ~ate~ials used in each department are as
follows: .., ,
Dep~en t 1 ~ .. . . . Material A
Deparbnentll' . . Material B
pepartment III 'MaterialB and C
The consumption of material in the manufacture of producfis as follows:
Product X- 1 unit of A, ~ units of B and 2 units of C.
Product Y- r unit of A and 1 unit of B:-
m
The Production _Budget for the period respect of these two products _is
as follows : _.,.-· ·
Estimated Production (Units) ·
Product X Product Y •
January 70,000 , 34,()()()
February 80,000 . ~6?000
March . 80~000 38,000
1st Quarter 2,30,000 1,08,000
IlndQuarter 2,40,000 1,40,000
Illrd Quarter 2,30,000 · 1,27,000
IVth Quarter · 2,60,000 t,45,000
Prepare_ a Materials Budget.
Units Units Units
Ans. I st Quarter A- 3,38,000; B- 5,68,000; · 4,60,000
c-
Ilnd Quarter A- 3,80,000; ·B- 6,20,000; C- 4,80,000
IIlrd Quarter A- 3,57,000; B- 5,87,000; C- 4,60,000
IVth Quarter A- 4,05,000; B- 6,6S,OOO; C- 5,20,000
Total A- 14,80,000; B- 24,40,000; ·e- 19,20,000
16. Prepare a Materials Budget for Ram Prakash & Sital Brothers from the
following information: .
(i) Units of raw- material required for tbe production of one un•~:
 Prod uct Raw-Material
Mad hu :· - 2 units of A and 2 units of B
Beena - 3 units of A and 2 units of B
(ii) The Production Budget for the period in respect of these two produ
cts
is as follows :- · ·
Estimated Production (Units)
Period Mad hu Beena

1st Quarter 20,000 40,000

llnd Quarter 25,000 30,000

Hird Quarter 30,000 25,000

Nth Quarter 40,000 20,000

(iii) Material Cost Per Unit : A - t 4; B- t 5.

Ans. (i) Materials Budget (Period wise) (in units ):
A-1, 60,0 00; B-1, 40,0 00; Tota l= 3,00,000
Ist Quar ter
A-1, 40,0 00; B-1, 35,0 00; Tota l= 2,75,000
Ilnd Quarter
A-1, 35,0 00; B-1, 40,0 00; Tota l= 2,75,000
Illrd Quarter
A- 1,40,000; B-1, 60,0 00; Tota l= 3,00,000
IVth Quarter
Tota l= A-5, 75,0 00; B-5 ,75,000; Tota l= 11,50,000

(ii) Material Cost Budget _:. (in~

Material A 23,00,000
Material B 28,75,000

Total - 51,75,000

17. Raj Limited has prepared the following Sales Budg et for the First Five
Months of 20 I 8 :
Mon ths Sales Budg et (in units)
Augu st 10,800
September 15,600
Octo ber 12,200
November 10,400
December 9,000
to
Inventory of Finished goods at the end of every mont h is to be equal
25% of the sales estimates for the next mont h. On Ist Augu st 2016 there
at
will be 2,700 units of product on hand. Ther e is no work s in progress
the end of any month. ·
 Every unit of product requires two types of material in the following
quantity.
Material x - 4 kg. Material y - 5 kg.
Material equal to one half of the requirement of next month's production
are to be hand at the end of every month and opening stock of every
month will be equal to half of material to be used in that month. This
requirement will be met on 1st August, 2018.
Prepare the following Budget for the quarter starting from the month of
August, 2018 :
(A) Production Budget (in units)
(B) Materials Purchase Budget (in units)

Ans.
.
(A) Production Budget August Sept. Oct. Nov.
(in units) 2018 2018 2018 201'8
12,000 . - 14,750 11,750 10,250
(B} Material Budget August . Sept. Oct.
(in units) 2018 2018 2018
1,
Material-X 53,500, 53,000 44,000
Material-Y 66,875 . 66,250 . 55,000

18. · A company manufacturers product X by using Raw-Material A and B in

the proportion ·o r 80: 20. During the month of June, it is expected that
1,000 tons of product X.will ·be sold. The Finished weight ofproduct X is
equal to total _weight of Raw material A and B u~ed. Budgeted and Actual
inventories for the month of June are as. follows:
Product Raw Material
X A B
Actual Inventory as on
1st June (in tons) 200 300 200
Budget Inventory as on
400 800
30th June (in towns) 100 .
The cost of Raw Material are as follows:
Material A @ ~ 500 per ton
Material B @ ~ 400 per ton
Prepare for the -month of June :
 (i) Production Requirement Budget
(ii) Material Requirement Budget
(iii) Material Purchase Cost-Budget
Ans. (i) Production Req~irement Budget of Product X - 900 tons ( I 000 +
100-200)
(ii) Material Requirement Budget A-820 tons B- 780 tons
(iii) Material.Purchase Cost Budget A f 4, 10,000 B ~ 3,12,000.
19. Prepare a Labour Cost Budget for the next year· from the following
informations of Pankaj Industries Ltd. :
(A) Production estimates : Product A
I I
.1.2,000 Units
B 10,000 Units
C l5,.000 Units
(B) Kinds of Labour required : Product Product Product
A B C
•
· 3 hrs.
(i) Skilled 2 hrs. 3 hrs.
(ii) Semi-skill~d 3 hrs. 3 hrs.- 4 hrs.
'
(iii) Unskilled . · 4 hrs. 5 hrs. 3 hrs.
(C) Labour Rate: Skilled f 5/- per hour
S~mi-skilled - • ·,_ · f 4/--per hour
Unskilled f 3/-per hour _
Ans. Skilled . .- . . ~ 4,95,000; Product A? 4,08,000
Semi-skilled . -. · . ~ 5,04,000; Product Bf 4,20,000
Unskilled - f 4,29,000; Product Cf 6,00,000
Total Labour Cost Budget ~ 14,28,000
.
20. The following informations relate to the production activity of Akash
Industries Ltd. for the year 2016-17 :
Production Estimates : Propuct X 5,000 Units
ProductY 6,000Units
Product Z 4,000Units
Budgeted Labour Cost :
KindsofLabour Cost (inf)
. X y z Total
(i) ~on-Technical 25,000 30,000 20,000 75,000
(ii) Technical 50000 60,000 40,000 1,50,000
'
Total 75,000 90,000 "60000
, 2,25,000
 The works manager anticipates the following changes for the year
2017-18:
(a) The rate of technical Labour will increase by 10%:
(b) The rate of non-technical labour will decrease by 10%.
· (c) Production to be increased by 20% over the year 2016-17.
Prepa.re a Labour Cost Budget for the year 2017-18 .
Ans. (i) Non-Technical . ~ 81,000 (i) Product X t 93,000
(ii) Technical ~ 1,98,000 (ii) Product Y t I, 11,600
(iii) Total Labour Cost (iii) ProductZ t74,000
Budget t 2, 79,000
21. The selling expenses of Deepak Traders for a particular period are as
follows:
(A) Fixed Expenses : t
(i) Salaries 16,000
(ii) Office Rent 2,000
(iii) Advertising 5,000
(B) Variable Expenses :
(i) Travellers Remuneration and Commissi~n -@ I% on Sales . .
(ii) Agents' commission @ 5% on sales.. -
(iii) Carriage outward@ 5% on sales.
Sales Forecast f 4,00,000 excluding agents'·sales~ 50,000. ·
Prepare a Selling and Distribution Overhead Budget.
Ans., 52,000.
22. The selling and distribution expenses ofa business for a particular budget
~
period are as follows :
(a) Sales office salaries 3,000
,,
2,250
(b) Fixed Expenses of Sales Office
3,000
(c) Amount allocated for Advertising
{d) Traveller's Remuneration:
9,000
(i) Fixed Salaries and Car allowance
(ii) Commission'@ I% on sales effected.
(e) Carriage Outward @ 5% on sales.
{f) Agen t's Commission@ 7% on sales. · .
Prepare a Selling and Distribution Overheads Budget for the following
levels of sales for the period :
 f 2, l 0,000 including agent's sales~ 22,500
f 2,40,000 including agent's sales~ 26,250
~ 2, 70,000 including agent's sales~ 26,250
•
Ans. Total selling overheads on various levels of sales are : ~ 31,200;
~ 33,225 and f 35,025.
23. Pankaj Manufacturing Company has estimated its sales for the coming
four year as under :
1st year · 6,000 units@~ 10 per unit
Ilndyear 8,000 units@~ 12 per unit
Illrdyear I 0,000 units@~ 15 per unit
IVthyear 12,000 units@~ 18 per unit
Additional investment of the companr at the end of each year is expected
to be:
Year Fixed Assets Current Assets
I 5 000 4,000
' 5,000
II . 7,000
III -8,000 5,000
N ' ,8 000 6:000
'
Cost:
Fixed overheads f I0,000 p.a .
Variable Cost f IO per unit.
Prepare a Financial Budget. ·
Ans. 1st Ilnd IIIrd Wtb Total
Year Year Year Year
(i) Receipts (~ 60,000 96,000 1,50,000 2,16,000 5,22,000
(ii) Payments (~ . 79,000 · ],02,000 1,23,000 1,44,000 4,48,000
Net Ghange in
. .
Cash Balance (~ -19,000 -6,000 +27;000 +72,000 +74,000

24. A company. has estimated sale of it~ products for next four years as
follows:
Year 1st 1,000 Units @ ~ I 00/-
Year 2nd 1,200 Units @t 100/-
Year 3rd 1,500 Units @ ~ 80/-
Year 4th 2,000 Units @t 80/-
 The additional investments in current assets will be:
at the end of I st year ~ Nii
2nd year . ~ 10,000
3rd year , 16,000
4th year · , 14,000
The purchases of machines is estimated as follows:
in 3rd year ~ 14,000
in 4th year f26,000
It is estimated that variable cost over the four years will be f 60/- per unit
and that fixed' overheads will be f 20,000 p.a. Prepare a Finance--Budget.
, Ans. Net change in Cash Balance(~: !'Year+ 20,000; II Year+ 18,000;
III Year-20,000; IV Year-20,000 and Total-2,000.
25. From the following infonnations of Shyam Traders, prepare a Office
Overheads Budget for the next year- :
Expenses of Current Budget:
(i) Fixed Expenses- · f 68, 750
(ii) Variable ~xpenses - f I0, 7~0 , .
(iii) Production' Budget of the current y,ear I 0,000 units
(iv) ~oduction-Forecast for ~xt year .I 2~000 units.
Assume-that ·variable expenses increase according to production.
Ans. Office Overheads Budget ~81,650.