1. The following information at 50% capacity is given for the working of a factory:

Fixed expenses: Sh.

Salaries 150,000

Rent and taxes 120,000

Depreciation expenses 180,000

Administrative expenses 210,000

Variable expenses:

Materials 600,000

Labour 750,000

Others 120,000

Semi-variable expenses

Repairs 300,000

Indirect labour 450,000

Others 270,000

It is expected that fixed expenses will remain constant at all capacities. Semi-variable expenses will not change between 45% and 60% capacity, will rise by 10% between 60% and 75% capacity, a further increase of 5% when capacity crosses 75%.

Estimated sales at various levels of capacity are;

Capacity Sales (Sh.)

60% 3,300,000

70% 3,900,000

90% 4,500,000

Required: Flexible budget and forecast for profit or loss at 60%, 70% and 90% capacity (6 marks)