BUDGETARY CONTROL By Prof.

CA BHARAT GUPTA

Sum. No. 1 :
The Bright Ltd. manufactures two brands of Pen – Bright & Hans. These are sold by three departments, in
different areas of the country. Sales Budget of these departments for the year ended 31st December, 2024
were :
Department – 1 3,00,000
Bright Department – 2 5,62,500
Department – 3 1,80,000
Department – 1 4,00,000
Hans Department – 2 6,00,000
Department – 3 20,000
Sales price are Rs. 3 and Rs. 1.20 in all departments.
It is estimated that by forced Sales Promotions, Sale of Hans, in Dept. 1 will increase by 1,75,000. It is also
expected that by increasing production and arranging extensive advertisement Dept. 3 will be able to
increase its Sales of Hans by 50,000.
It is recognized that estimated Sales by Dept. 2 represent an unsatisfactory target. It is agreed to increase
estimates of both brands by 20%.
Prepare Sales Budget for the year ended 31st December 2024

Sum. No. 2 :
The Sales Director of a Manufacturing Company reports that next year, he expects to sell 54,000 units of
its product.
The Production Director, in consultation with the Store Keeper, has given the following information –
Two kinds of Raw Materials – A & B are required for manufacturing of the Product. Each unit of the Product
required two units of A and three units of B. The estimated opening Stock at the beginning of the next
year were – Finished Product 10,000 units
Material A 12,000 units
Material B 15,000 units
The desirable closing balances at the end of the next year are –
Finished Product 14,000 units
Material A 13,000 units
Material B 16,000 units
Prepare a quantitative chart, showing Material Purchase Budget for the next year.

Sum. No. 3 :
From the following information, prepare Production Budget for Suraj Ltd. for its all three products :
Product As on January 1st, As on 30th June, Normal Loss in Budgeted Sales
2018 (Units) 2018 (Units) Production (Units)
CAT 16,000 20,000 4% 1,20,000
BAT 18,000 16,000 2% 1,00,000
RAT 24,000 28,000 6% 1,60,000

Sum. No. 4 :
Production Cost of a factory for the year are as follows :

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BUDGETARY CONTROL By Prof. CA BHARAT GUPTA

Direct Labor Cost 75,000

Direct Material Cost 1,20,000
Production Overheads :
Fixed 45,000
Variable 70,000 1,15,000
The Production Manager anticipates the following changes in the following year :
a) The average rate of Direct Labor will fall from Rs. 4 per hour to Rs. 3 per hour.
b) Production efficiency will decrease by 4%
c) Direct Labor hours will increase by 10%
d) The purchase price per unit of Direct Material and of other materials and services included among
Overhead will remain unchanged.
Prepare a Budget and compute Factory Overhead Rate, the Overhead being absorbed on Direct Wages.

Sum. No. 5 :
Following are the estimated Sales of a Company for eight months ending 30th October, 2018 :
Months Estimated Sales Months Estimated Sales
April 2018 12,000 August 2018 10,000
May 2018 13,000 September 2018 12,000
June 2018 9,000 October 2018 14,000
July 2018 8,000 November 2018 12,000
As a matter of policy, the Company maintains the closing balance of finished goods and raw materials as
follows –
Finished Stock 50% of the estimated Sales for the next month
Raw Materials Estimated consumption for the next month
Every unit of production requires 2 kg. of Raw Material costing Rs. 5 per kg.
Prepare Production Budget (in Units) and Raw Materials Purchase Budget (in Units and Cost) of the
Company for the half year ended 30th September, 2018.

Sum. No. 6 :
A factory produces 20,000 units. The Budgeted expenses are as below :
Expenses Per Unit (Rs.)
Raw Materials 75
Direct Labor 20
Direct Expenses 25
Overheads 15
Fixed Overheads 20
Administrative Overheads (Fixed) 10
Selling Expenses (10% Fixed 15
Distribution Expenses (25% Fixed) 20
Total Cost Per Unit 200
Prepare a Budget for 15,000 units and 10,000 units.

Sum. No. 7 :
Draw a Flexible Budget for Overhead expenses on the basis of the following data and determine the
Overhead Rates at 70%, 80% and 90% plant capacity :
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BUDGETARY CONTROL By Prof. CA BHARAT GUPTA

At 80% Capacity
Variable Overheads –
Indirect Labor 12,000
Stores including Spares 4,000
Semi Variable Overheads –
Power (30% Fixed, 70% Variable) 20,000
Repairs and Maintenance (60% Fixed, 40% Variable) 2,000
Fixed Overheads –
Depreciation 11,000
Insurance 3,000
Salaries 10,000
Total 62,000
Estimated Direct Labor Hours 1,24,000

Sum. No. 8 :
Pankaj Ltd. gives you the following information :
For Production of 10,000 kg. of Finished Product, per kg.
Direct Materials 120
Direct Wages 60
Variable Factory Overheads 50
Fixed Factory Overheads 30
Variable Expenses (Direct) 10
Selling Expenses (10% Fixed) 30
Administrative Expenses (Rigid at all Levels) 10
Distribution Expenses (20% Fixed) 10
Prepare a flexible Budget for Production of 7,500 kgs., 9,000 kgs. And 12,000 kgs.

Sum. No. 9 :
The expenses budgeted for production at 100% capacity in a factory are given below :
Materials At 100% Capacity (Rs.)
Labour 6,00,000
Direct Expenses (100% Variable) 2,00,000
Variable Overheads 40,000
Fixed Overheads 2,00,000
Administrative Overheads (100% Fixed) 80,000
Selling Overheads (10% Fixed) 40,000
Distribution Overheads (20% Fixed) 1,20,000
60,000
Prepare a budget for the production at
a) 60% capacity and
b) 80% capacity

Sum. No. 10 :
ABC manufacturers produces 7,500 units by utilizing 75% capacity and provides following information :

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BUDGETARY CONTROL By Prof. CA BHARAT GUPTA

Direct Materials At 75% Capacity (Rs.)

Direct Labour 7,50,000
Direct Expenses 6,00,000
Factory Overheads 3,00,000
Administrative Overheads (100% Fixed) 4,50,000
Selling Overheads (10% Fixed) 3,00,000
Additional Information :
a) Direct Material, Direct Labour and Direct Expenses are Variable Cost.
b) Factory Overheads per unit increases by 10%, if the capacity utilisation goes down below 75% and
decreases
c) Office Overheads are Fixed Overheads.
d) Selling Overheads per unit increases by 20%, if the capacity utilisation goes below 75% and decreases
by 25% if the capacity utilisation goes up above 75%.
e) It is the policy of the Company to charge profit at 20% on Selling Price.
You are required to prepare a flexible budget at 50%, 75% and 100% capacity utilisation.

Sum. No. 11 :
Excellent Manufacturers can produce 4,000 units of a certain product at 100% capacity. Following
information is available from its records :
August 2018 September 2018
Units Produced 2,800 3,600
Rs. Rs.
Repairs and Maintenance 500 560
Power 1,800 2,000
Shop Labor 700 900
Consumable Stores 1,400 1,800
Salaries 1,000 1,000
Inspection 200 240
Depreciation 1,400 1,400
Rate of production per hour is 10 units. Direct Material cost per unit is Re. 1 and Direct Wages per hour is
Rs. 4.
You are required to :
a) Compute the Cost of Production at 100%, 80% and 60% capacity, showing the variable, fixed and semi
variable budget.
b) Find the overhead absorption rate per unit at 80% capacity.

Variable cost per unit included in Semi Variable Cost : Difference in Cost / Difference in Units

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