Question 1.

Dandys manufacturers Company Ltd, makers of product Y has prepared its budget for 2018, based on two activity levels of 80% and 100% with production units of 2800 and 3500 units respectively.

The budget is as follows

80% 100%

Sales $224000 $2800000

Direct material 84000 105000

Direct labour 50400 63000

Production overhead 48800 53000

The companys actual result for the period is as follows

Sales in Units 3150 units

Sales $252000

Direct material $ 94000

Direct Labour $ 60000

Overhead (60% of amounts is fixed) $ 50000

Required

Prepare a flexible budget for a production level of 70% and 90% and compare the flexible budget at 90% level of activity with the actual result. (25)

Question 2

A business supplies the following figures about its activities

Fixed $ 300000

Variable cost $ 20 per unit

Forecast output (sales) 20000 units

Selling price $50 per unit

Required

Illustrate by means of breakeven chart

1. The breakeven point
2. The profit at full capacity
3. The margin of safety