Budget Qn 33

Question One (33 marks) Bridge and Blige Limited make metal casings for lawn mowers in one standard size. In February 2015 the company's budget for sales and related costs is as follows: TZS'000 Sales: 800 units x TZS 35,060 28,000 Costs Direct materials: 800 Units & (2kg x TZS 6,000) (9,600) Direct labour: 860 units x (1 hour . TZS 7,500) (6.600) Production overheads (4,000) 8,400 Selling and administrative overheads (2,300) Net Profit 6,100 The actual figures for February 2015 are as follows! Sales: 900 Units @ TZS 36,000 32,400 Costs Direct materials: 900 Units x (1 .9kg x TZS 5,500) (9,405) Direct labour: 900 units x (1.2, hours x TZS 7,000) (7,506) Production overheads (4,400) 11,035 Selling and administrative overheads (2,450) Net profit 8,585 D Calculate unit cost for direct material, direct labour and sales price to be applied for the purpose of preparing flexed budget (6 marks) Prepare a flexed budget for 900 units for February 2015 and calculate the variances (21 marks) iif . Discuss the benefits of using flexed budgets Vs Static budget in respect to evaluating a production department (6 marks)