Question

15155 SECTION D Compulsory den 10.000 s the budget for t ory 1. A tak Pued overheads 11,00.000 Variable overheads Direct Selling penses (10 fixed Administration expenses (Rs 50000 Distribution expenses (20 fixed) Prepare a budget of the production (a) 8000 units (b) 6000 units. Assum the administration expenses are rigid for all levels of Production

Answer 1

Production Budget is a budget which describes us the actual units to be Manufactured  , it tell the company how much inventory to be maintained for future sales ,

production Budget Comprises of all the expenses ,raw material ,labour and over heads  which are required to produce the goods

statement showing the  Budget for the production for 8000 units

Particulars	RAte /per qty	Amount ( 8000units)	Total
Material	70	8000*70	560000
Labour	25	8000*25	200000
VAriable overhead ( direct )	5	8000*5	40000
Total Prime cost	100	8000*100	800000
Add Production Overheads :
Fixed overhead	12.5 (100000/8000)	8000*12.5	100000
Variable Over heads	20	8000*20	160000
Work cost	132.5	8000*132.5	1060000
Add Administrative expenses ( fixed)	6.25 =(50000/8000)	8000*6.25	50000
Cost of Production	138.75	8000*138.75	1110000
Add selling Expense :
Fixed 10% of 13 #	1.63 =(13000/8000)	8000*1.63	13000
variable 90% of 13	11.70	8000*11.70	93600
Add distribution expenses
Fixed 20% of 7 ##	1.75 = (14000/8000)	8000*1.75	14000
Variable 90% of 7	5.60	8000*5.60	44800
Total cost of sales	159.43	8000*159.43	1275400

B) statement showing the  Budget for the production for 6000 units

Particulars	RAte /per qty	Amount ( 6000units)	Total
Material	70	6000*70	420000
Labour	25	6000*25	150000
VAriable overhead ( direct )	5	6000*5	30000
Total Prime cost	100	6000*100	600000
Add Production Overheads :
Fixed overhead	16.6667 =(100000/6000)	6000*16.6667	100000
Variable Over heads	20	6000*20	120000
Work cost	136.6667	6000*136.6667	820000
Add Administrative expenses ( fixed)	8.3333 =(50000/6000)	6000*8.3333	50000
Cost of Production	145	6000*145	870000
Add selling Expense :
Fixed 10% of 13 #	2.1666 =(13000/6000)	6000*2.1666	13000
variable 90% of 13	11.70	6000*11.70	70200
Add distribution expenses
Fixed 20% of 7 ##	2.3333 = (14000/6000)	6000*2.3333	14000
Variable 90% of 7	5.60	6000*5.60	33600
Total cost of sales	166.7999	6000*166.7999	1000800

Working

Fixed cost is a cost which doesnot change as its remain the fixed  , fixed cost occur if there is no production also so all the fixed cost on 10000 units will same for 8000 units and 6000 units

# Fixed selling expenses

10% of 13 = 1.3

1.3 is for 10000 units

so total fixed cost = 10000*1.3=13000

so fixed cost for 8000 units = 13000

and fixed cost for 6000 units = 13000

## Fixed distrubition expenses'

20% of 7 = 1.40

1.40*10000= 14000

so for 8000 units = 14000

and 6000 units = 14000

Variable expenses is expense which varies as per qty of production