Page 128 - DCOM206_COST_ACCOUNTING_II

Unit 6: Budgetary Control

Working notes: Notes
(1) 60% of works overheads (i.e., ` 1,50,000) are fixed. Therefore, remaining 40% of ` 2,50,000
(i.e., ` 1,00,000) is a variable cost.

Therefore, the works overheads for actual output of 60,000 units will be:
60,000units
1,50,000 1,00,000  = ` 2,10,000

1,00,000units
(2) 80% of ` 40,000 of administrative expenses is fixed.
Therefore, the administrative expenses for the actual output of 60,000 units will be:

60,000

32,000 8,000  = ` 36,800
1,00,000
(3) Selling overheads are fixed to the extent of 50%.
Therefore, selling overheads for the actual output of 60,000 units will be:
60,000

10,000 10,000  = ` 16,000
1,00,000

Task Prepare a proforma of flexible budget of a manufacturing organisation for three
imaginary capacity levels in a suitable form.



Caselet Budget
A Manufacturing Company has the production capacity of 20,000 units per year.
The expenses budgeted for 12,000 units for a period are as follows:

Per unit (`)
Direct materials 100
Direct wages (40% fixed) 20
Manufacturing expenses (40% fixed) 20
Administration expenses (fixed) 10
Selling and Distribution expenses (60% fixed) 10

Total Cost 160
Profit 40

Selling Price 200
Prepare a flexible budget showing 70% and 100% level of capacity. It is expected that the
per unit selling price will remain constant up to 60% capacity, there after a 5% reduction is
expected up to 90% capacity level. Above 90% a 2 ½% reduction in original price is expected
for every 5% increase in volume.
Source: Cost Accounting Theory and Practice by K. S. Thakur

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