BUDGETS AND BUDGETARY CONTROL (15 MARKS)

A factory is currently working at 50 per cent capacity and produces 10,000 units. Estimate the profits of the Company when it works to 60 per cent and 80 per cent capacity assuming that the company can sell whatever it produces.

At 60 per cent working, raw material cost increases by 2 per cent and selling price falls by 2 per cent.

At 80 per cent, raw material cost increases by 5 per cent and selling price falls by 5 per cent. At 50 per cent working, the product costs Shs.180 per unit and is sold at Shs.200 per unit. The unit cost of Shs.180 is made up as follows:

Shs.

Material	100
Labour	30
Factory Overhead	3	(40% fixed)
Administration Overhead What comments can you offer?	20	(50% fixed)