flexible budget

question 10%
ABC LTD. Manufactures a single project for which market demand exists for additional qty. present sales 20%
of RS.60000 per month utilises only 60% capacity of the plant. following data are available 30%
30%
selling price(per unit) 10 variable cost 3 prepare operating profits at 60%, 70% and 40%
variable cost 3 semi variable cost 80% levels at current selling price and 50%
operating profits at proposed selling price
fixed cost ( at 20000 fixed 6000 at the above levels 60%
present level) variable part 0.5 70%
80%
90%
solution: 100%
capacity production 60.00% 60.00%
units sold 6000 6000
current selling price 10 10
sales value 60000 60000
variable cost 18000 18000
semi variable cost fixed part 6000 6000
semi variable cost variable part 3000 3000
total semi variable 9000 9000 1
fixed cost 20000 20000 2
3
total cost 47000 47000
profit 13000 13000
18000
proposed selling price 9 9
sales value 54000 54000 9000
total cost 47000 47000
profit 7000 7000 20000
cash budget solution: working notes
the following data relates to ABC LTD.The finance manager has made the following sales particulars april may
forcast for the first 5 months of comig year, commecing from 1st april 2023. sales 40000 45000
month sales cash sales 16000 18000
april 40000 credit sales 24000 27000
may 45000 creditors
june 55000 cost of sales(60% of sales) 24000 27000
july 60000 desired closing inventory 60000 69000
august 50000
other data less: opening inventory 51000 60000
1. debtors and creditors balance at beginnig of year are 30000 and 14000 respectively. purchases 33000 36000
balance of other assets and liabilities are
(a) cash balance 7500 cash budget
stock 51000 particulars april may
accured sales commssiion 3500 opennig balance 7500 33000
2. 40% sales are on cash basis. Credit sales are collected in month following the sale recipts
3. cost of sales are 60% of sales cash sales(40%) 16000 18000
4. the only other variable cost is 5% commission to sales agents. Sales commission is paid a month ater it is earned receipt from debtors 30000 24000
5. inventory is kept equal to sales requirements for next months budgeted sales total receipts 53500 75000
6. trade creditors are paid in the following month after purchases payments
7. fixed costs are 5000 per month including 2000 depreciation payment to creditors 14000 33000
prepare a cash budget for april ,may and june 2023. show sales, creditors, total receipts and total payment information graphically sales commission 3500 2000
fixed cost(5000-2000) 3000 3000
total payments 20500 38000
deficit/surplus 33000 37000
june july august
55000 60000 50000
22000 24000 20000 opening debtors
33000 36000 30000 30000
opening creditors
33000 36000 30000 14000
66000

69000
30000 sales graph
60000
budget 50000
june
40000
37000
30000

22000 20000
27000 10000 18000 22000
16000
86000 0
april may june
36000
cash sales credit sales
2250
3000
41250 total receipts
44750

50000
40000
30000
20000
10000
0
april may june

cash sales(40%) receipt from debtors

following information is available with respect to ABC LTD.
SELLING PRICE 700 Predicted units of output are 0,100,200,300, 400, 500
FIXED COST 84000 600 and 700
VARIABLE COST 420 based upon the info., compute the following
CAPACITY (IN UNITS) 8000 1. cost volume profit chart
2. break even ponit(in units and rupees)
contribution income statement at 300 units of output

solution:
contribution margin 280
profit volume ratio 0.4 cvp graph of ABC LTD.
600000
table of predicted cost and revenue
units fixed cost total variable cost total cost total revenue 500000 490000
0 84000 0 84000 0
420000
100 84000 42000 126000 70000
400000
200 84000 84000 168000 140000 350000
300 84000 126000 210000 210000

RUPEES
300000 280000
400 84000 168000 252000 280000
500 84000 210000 294000 350000 210000
200000
600 84000 252000 336000 420000 140000
700 84000 294000 378000 490000
100000 70000
BREAK EVEN POINT IN UNITS in rupees 0
0
fixed cost/pv 0 100 200 300 400 500 600 700
fixedcost/ 300 ratio
UNITS
Contribution 210000

Contribution income statement at 300 units of output total cost total revenue
sales 210000
less:VX 126000
CONTRIBUTION 84000
LESS: FC 84000
PROFIT 0
ABC Ltd. manufacturing company producing three types of products i.e. P, Q and R. The current pattern of sales of three products is in the ratio of 8:2:1
respectively. The relevant data are as follows -
Products P Q R
Selling Pric 200 260 420
Raw Materi 0.5 1.2 2.5
Direct Mate 0.25 - -
Skiiled Lab 4 6 8
Semi Skiile 2 2 3
Variable
Prices of O 40
raw materials and80direct materials
80 respectively, are ₹ 100 and ₹ 40 per kg. Wage rate of skilled and semi-skilled labour, respectively, are ₹6
and ₹5. Each operator work 8 hours a day for 25 days in a month. The position of inventory are as follows -
Particulars
Raw Materials
Direct Materials P Q R
Opening 600 400 400 100 50
Closing 650 260 200 300 50
The fixed overhead amounts to ₹ 2,00,000 per month. The company desires a profit of ₹ 1,20,000 per month. Prepare the followi
1. Sales budget in quantity and value
2. Production budget showing quantity to b
3. Purchase budget showing the quantity an
4. Direct labour budget showing the numbe

Given
Products P Q R
Selling pric 200 260 420
Raw materi 0.5 1.2 2.5
Direct mate 0.25 0 0
skilled lab 4 6 8
semi skille 2 2 3
variable o 40 80 80
sales mix 8 2 1

ParticularsRaw materiDirect mateP Q R

Opening 600 400 400 100 50
Closing 650 260 200 300 50

Sales budget in quantity

Particulars P Q R
Selling price 200 260 420
Variable cost
Raw materi 100 50 120 250
direct mate 40 10 0 0
skilled lab 6 24 36 48
semi skille 5 10 10 15
Variable overheads 40 80 80
Total variable cost 134 246 393
Contribution per unit 66 14 27
Sales mix 8 2 1
Weighted CPU 528 28 27 583

Desired pro 120000

add: fixed 200000
Desired co 320000
No. of batc 549
Sales Qty P 4392
Q 1098
R 549

SALES BUDGET IN VALUE

ParticularsP Q R
Budgeted s 4392 1098 549
Budgeted p 200 260 420
Budgeted s 878400 285480 230580

PRODUCTION BUDGET
ParticularsP Q R
Budgeted s 4392 1098 549
Add: Closin 400 100 50
Less: Open 200 300 50
Budgeted 4592 898 549

RAW MATERIAL USAGE BUDGET

ParticularsP Q R
Budgeted p 4392 1098 549
raw materi 0.5 1.2 2.5
total raw m 2196 1317.6 1372.5
Direct mate 0.25 0 0
Total direc 549 0 0
ratio of 8:2:1
pqr manufacture and sells 3vtypes of products A,B,C.The selling price per unit of these products are rs.200, 160,100 resoectively. The
corresponding VC per unit are 120,120,40 respectively.total fixed costs are rs. 1160000. qty. wise or sales mix in which these products are
manufactured and sold are20%, 30% and 50% respectively.calculate the following:
1) The overall break even quantity 2) product wise BEP In units 3)product wise BEP in rupees 4)overall BEP in Value 5)overall P/V Ratio 6)
the predicted units of output are 10000, 15000, 20000, 25000 and 30000. 7) graphically show overall BEP And P/V chart.

solution:
product selling price variable cost CPU Sales mix weighted CPU Weighted CPU Formula= sales
A 200 120 80 0.2 16 mix *contribution per unit
B 160 120 40 0.3 12
C 100 40 60 0.5 30
Composite CPU 58

FIXED COST 1160000 OVERALL BEP(fixed cost/ comp CPU)

Chart Title
COMP. CPU 58 20000
4500000
4140000
TABLE for the computation of product wise BEP 4000000
weighted
product avg. selling Weighted weigh. CPU BEP(in units) BEP(in value) 3450000 3560000
3500000
price avg. VC 3160000
A 40 24 16 4000 800000 3000000 2760000
B 48 36 12 6000 960000 2500000 2360000

RUPEES
C 50 20 30 10000 1000000 1960000 2070000
2000000
Total 138 80 58 20000 2760000
1500000 1380000
overall PV Ratio(total fixed cost/overall BEP) 42.03%
1000000
OVERALL BEP 2760000
TABLE OF PREDICTED COST AND REVENUE 500000
Units FC VC TC SALES PROFIT/LOSS 0
10000 15000 20000 25000 30000
10000 1160000 800000 1960000 1380000 -580000
15000 1160000 1200000 2360000 2070000 -290000 UNITS
20000 1160000 1600000 2760000 2760000 0
25000 1160000 2000000 3160000 3450000 290000 Units TC SALES
30000 1160000 2400000 3560000 4140000 580000
question
a firm wants to replace one of its existing machines. Two alternative machines - machine A &B are under consideration
the costs associated with these alternatives are as follows
machine A B
Variable cost per unit 50 10
total fixed cost P.a 50000 150000
you are required to : 1)calculate the indifference point 2) suggest the most economical alternative machine to replace the existting one when
expected level of annual production is : (a) 5000 units (b) 1000 units

solution:
cost indifference point(units) 2500 (difference in fixed cost)/( difference in variable point)
MACHINE A MACHINE B
units produced total variable cost total fixed cost total cost(A) total variable cost total fixed cost total cost(B)
0 0 50000 50000 0 150000 150000
500 25000 50000 75000 5000 150000 155000
1000 50000 50000 100000 10000 150000 160000
1500 75000 50000 125000 15000 150000 165000
2000 100000 50000 150000 20000 150000 170000
2500 125000 50000 175000 25000 150000 175000
3000 150000 50000 200000 30000 150000 180000
3500 175000 50000 225000 35000 150000 185000
4000 200000 50000 250000 40000 150000 190000
4500 225000 50000 275000 45000 150000 195000
5000 250000 50000 300000 50000 150000 200000
5500 275000 50000 325000 55000 150000 205000
6000 300000 50000 350000 60000 150000 210000
ABC ltd is a power bank manufacturing company and is currently selling its products for the travellers through online portals. The company is now exploring to supply

Particulars amount
Direct materials 160
Direct Labour 20
Variable manufacturing overhead 50
Fixed overhead 10
Depreciation 10
variable selling overhead 5
Royalty 10
profit 50
315
central excise duty 30
selling price per unit 345

(a) Airlines is ready to buy 200 such power banks at 250 each. Advice the company weather offer should be accepted or not.
(b) At what price the company should supply the power banks to its sister concerns, if the policy of the company is to transfer at cost?

a)

Cost Benefit analysis of export order

particulars cost benefits
Offered sales price 250
variable costs
direct material 160
direct labour 20
variable overheads 50
royalty 10
central excise duty 30
total 270 250

b)
Particulars amount
Sales price 345
Less: Profit 50
Less: variable selling overheads 5
Price to be quoted 290
now exploring to supply the power banks to an airline. The accounts department has provided the following information about the current cost structure of its product.
re of its product.