national Economics University

The Cost Sheet of a Company based on a budgeted volume of sales of 3,00,000 units per Quarter is as under : Rs. Per unit Direct materials 5.00 Direct wages 2.00 e50314591e Factory overheads ( 50 % fixed) 6.00 Selling and Administrative overheads (variable ) 3.00 ebrary Selling Price 18.00 When the budget was discussed it was felt that the company would be able to achieve only a volume of 2,50,000 units of production and sales per Quarter. The Company therefore decided that an aggressive sales promotion campaign should be launched to achieve the following improved operations : Proposal I : (a) Sell 4,00,000 units per quarter by sending Rs. 2.00,000 on special advertising (b) The factory fixed costs will increase by Rs.4,00,000 per Quarter Proposal II : (a) Sell 5,00,000 units per Quarter subject to the following conditions (b) An overall price reduction of Rs. 2 per unit is allowed on all sales (c) Variable Selling and Administration costs will increase by 5 % (d) Direct Material costs will be reduced by 1 % due to purchase price discounts (b) The fixed factory costs will increase by Rs. 2,00,000 more You are required to prepare a Flexible Budget at 2,50,000 units, 4,00,000 units and 5,00,000 units of output per quarter and calculate the profit at each of the above levels of output. e50314591ee0a50aec732cd229317519 ebrary