Model 15: Flexible budget (Marginal cost)

Following are the budgeted expenses for production of an electronic component of TV (10,000 units):

Direct materials

50

Direct labour

20

Variable overheads

20

Fixed overheads (Rs. 1,00,000)

10

Variable expenses (Direct)

5

Selling expenses (10% fixed)

10

Distribution expenses (20% fixed)

5

Administration expenses (Rs. 50,000)

5

Total cost of sale per unit (to make and sell)

125

Prepare a budget for production of (a) 7,000 units and (b) 9,000 units, showing distinctly marginal cost and total cost. Assume that the administration expenses are rigid for all levels of production.