Maindi processing Company Ltd. manufactures a standard product branded Maindimix. Currently, it is operating on a normal activity level of 70% within an output of 6,300 units. The sales director believes that a realistic forecast for the next budget period would be at an activity level of 50%. The following data relates to the forecasted costs of the product for different levels of activity:

	60% Sh.	70% Sh.	80% Sh.
Direct materials Direct wages Production overheads Administration overheads Selling and distribution overheads Total cost	151,200 64,800 150,400 126,000 169,200 661,900	176,400 75,600 164,800 126,000 176,400 719,200	201,600 86,400 179,200 126,000 183,600 776,800

Profit is 20% of selling price.

Required:

Flexible budget based on 50% level activity

State four problems which might arise from such a change in level of activity