The Budget manager of Jhumpa Engineering Ltd is preparing a Flexible Budget for the accounting year commencing from 1April 2009.
The company produces a single product ‘Dimpu.’ Direct materials cost Rs. 7 per unit. Direct Labour averages Rs. 2.50 per hour and requires 1.60 hours to produce one unit of Dimpu. Salesmen are paid a commission of Re.1 per unit sold. Fixed Selling and Administrative Expenses amount to Rs. 85,000 per year.
Manufacturing Overheads under specified conditions of volume have been estimated as follows:
|
Volume of Production (units) |
1,20,000 Rs |
1,50,000 Rs |
|
Expenses: |
||
|
Indirect Materials |
2,64,000 |
3,30,000 |
|
Indirect Labour |
1,50,000 |
1,87,500 |
|
Inspection |
90,000 |
1,12,500 |
|
Maintenance |
84,000 |
1,02,000 |
|
Supervision |
1,98,000 |
2,34,000 |
|
Depreciation—Plan& Equipment |
90,000 |
90,000 |
|
Engineering Services |
94,000 |
94,000 |
|
Total Manufacturing Overheads |
9,70,000 |
11,50,000 |
Normal capacity of production of the company is 1,25,000 units. Prepare a Budget of Total Cost at 1,40,000 units of output.