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.