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Prepare flexible budget for production 80% and activity on the basis of the following information Production at 50% capacity -5000 units Raw material -80/- Direct labour -50/-per unit Direct expenses -15/-per unit Factory expenses -50000/-(50%fixed) Administrative Expenses -60000/-(variable)?
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Prepare flexible budget for production 80% and activity on the basis o...
Flexible Budget for Production at 80% Capacity
Production at 50% Capacity
- 5000 units
Production at 80% Capacity
- 8000 units
Raw Material
- Rs. 80/- per unit
- Total raw material cost for 5000 units: Rs. 4,00,000/-
- Total raw material cost for 8000 units: Rs. 6,40,000/-
Direct Labour
- Rs. 50/- per unit
- Total direct labour cost for 5000 units: Rs. 2,50,000/-
- Total direct labour cost for 8000 units: Rs. 4,00,000/-
Direct Expenses
- Rs. 15/- per unit
- Total direct expenses for 5000 units: Rs. 75,000/-
- Total direct expenses for 8000 units: Rs. 1,20,000/-
Factory Expenses
- Rs. 50,000/- fixed expenses
- Rs. 25/- per unit variable expenses
- Total factory expenses for 5000 units: Rs. 1,25,000/-
- Total factory expenses for 8000 units: Rs. 2,00,000/-
Administrative Expenses
- Rs. 60,000/- variable expenses
- Administrative expenses do not vary with production levels
Total Cost
- Total cost for 5000 units: Rs. 8,50,000/- (4,00,000 + 2,50,000 + 75,000 + 1,25,000 + 60,000)
- Total cost for 8000 units: Rs. 13,20,000/- (6,40,000 + 4,00,000 + 1,20,000 + 2,00,000 + 60,000)
Explanation
A flexible budget is a budget that adjusts to changes in activity levels. In this case, we are preparing a flexible budget for production at 80% capacity. We are given information on the cost of production at 50% capacity, and we need to use this information to estimate the cost of production at 80% capacity.
We start by calculating the total cost of raw material, direct labour, direct expenses, factory expenses, and administrative expenses for production at 50% capacity. We then use this information to estimate the cost of production at 80% capacity by adjusting the costs proportionally. For example, if the cost of raw material for 5000 units is Rs. 4,00,000/-, the cost of raw material for 8000 units is estimated to be Rs. 6,40,000/-, which is 60% higher than the cost for 5000 units (i.e., 8000/5000 = 1.6).
We also note that factory expenses have both fixed and variable components. Fixed expenses remain the same regardless of production levels, while variable expenses increase with production levels. We need to take this into account while estimating the cost of production at 80% capacity.
Finally, we add up the total cost of production at 80% capacity by adding up the cost of raw material, direct labour, direct expenses, factory expenses, and administrative expenses.
Production at 50% Capacity
- 5000 units
Production at 80% Capacity
- 8000 units
Raw Material
- Rs. 80/- per unit
- Total raw material cost for 5000 units: Rs. 4,00,000/-
- Total raw material cost for 8000 units: Rs. 6,40,000/-
Direct Labour
- Rs. 50/- per unit
- Total direct labour cost for 5000 units: Rs. 2,50,000/-
- Total direct labour cost for 8000 units: Rs. 4,00,000/-
Direct Expenses
- Rs. 15/- per unit
- Total direct expenses for 5000 units: Rs. 75,000/-
- Total direct expenses for 8000 units: Rs. 1,20,000/-
Factory Expenses
- Rs. 50,000/- fixed expenses
- Rs. 25/- per unit variable expenses
- Total factory expenses for 5000 units: Rs. 1,25,000/-
- Total factory expenses for 8000 units: Rs. 2,00,000/-
Administrative Expenses
- Rs. 60,000/- variable expenses
- Administrative expenses do not vary with production levels
Total Cost
- Total cost for 5000 units: Rs. 8,50,000/- (4,00,000 + 2,50,000 + 75,000 + 1,25,000 + 60,000)
- Total cost for 8000 units: Rs. 13,20,000/- (6,40,000 + 4,00,000 + 1,20,000 + 2,00,000 + 60,000)
Explanation
A flexible budget is a budget that adjusts to changes in activity levels. In this case, we are preparing a flexible budget for production at 80% capacity. We are given information on the cost of production at 50% capacity, and we need to use this information to estimate the cost of production at 80% capacity.
We start by calculating the total cost of raw material, direct labour, direct expenses, factory expenses, and administrative expenses for production at 50% capacity. We then use this information to estimate the cost of production at 80% capacity by adjusting the costs proportionally. For example, if the cost of raw material for 5000 units is Rs. 4,00,000/-, the cost of raw material for 8000 units is estimated to be Rs. 6,40,000/-, which is 60% higher than the cost for 5000 units (i.e., 8000/5000 = 1.6).
We also note that factory expenses have both fixed and variable components. Fixed expenses remain the same regardless of production levels, while variable expenses increase with production levels. We need to take this into account while estimating the cost of production at 80% capacity.
Finally, we add up the total cost of production at 80% capacity by adding up the cost of raw material, direct labour, direct expenses, factory expenses, and administrative expenses.
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Prepare flexible budget for production 80% and activity on the basis of the following information Production at 50% capacity -5000 units Raw material -80/- Direct labour -50/-per unit Direct expenses -15/-per unit Factory expenses -50000/-(50%fixed) Administrative Expenses -60000/-(variable)?
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Prepare flexible budget for production 80% and activity on the basis of the following information Production at 50% capacity -5000 units Raw material -80/- Direct labour -50/-per unit Direct expenses -15/-per unit Factory expenses -50000/-(50%fixed) Administrative Expenses -60000/-(variable)? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Prepare flexible budget for production 80% and activity on the basis of the following information Production at 50% capacity -5000 units Raw material -80/- Direct labour -50/-per unit Direct expenses -15/-per unit Factory expenses -50000/-(50%fixed) Administrative Expenses -60000/-(variable)? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Prepare flexible budget for production 80% and activity on the basis of the following information Production at 50% capacity -5000 units Raw material -80/- Direct labour -50/-per unit Direct expenses -15/-per unit Factory expenses -50000/-(50%fixed) Administrative Expenses -60000/-(variable)?.
Prepare flexible budget for production 80% and activity on the basis of the following information Production at 50% capacity -5000 units Raw material -80/- Direct labour -50/-per unit Direct expenses -15/-per unit Factory expenses -50000/-(50%fixed) Administrative Expenses -60000/-(variable)? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Prepare flexible budget for production 80% and activity on the basis of the following information Production at 50% capacity -5000 units Raw material -80/- Direct labour -50/-per unit Direct expenses -15/-per unit Factory expenses -50000/-(50%fixed) Administrative Expenses -60000/-(variable)? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Prepare flexible budget for production 80% and activity on the basis of the following information Production at 50% capacity -5000 units Raw material -80/- Direct labour -50/-per unit Direct expenses -15/-per unit Factory expenses -50000/-(50%fixed) Administrative Expenses -60000/-(variable)?.
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