Example 1: Budget for previous two years 2009 and 2010 are given as under: Year 2009 Year 2010 Units 5000 6000 Sales 3000000 3960000 Material 1250000 1575000 Labour 600000 792000 Overheads (Variable & Fixed) 700000 870000 Total Cost 2550000 3237000 Profit 430000 723000 Price increase in 2010 was due to inflation and same was applicable to overheads also. Incremental variable overheads at inflated price in 2010 were Rs. 100000. (ii) The management of the company of the view that sales volume increase in 2011 will be same as seen in 2010 compared to 2009. As far as increase in sales price, and other cost components are concerned, there are two views that (a) same increase rate will prevail (b) increase will be less by 2%. Prepare budgeted profitability for the year 2010 taking both views (a) and (b) in (iii) above. Solution