Q1 Mr.

Devraj manufactures two types of toys 'raja' and 'rani' and sells them in agra and mumbai market. The
following information is made available for the current year:
Market
product
Budgeted sales
Actual sales
Agra
Mumbai

Raja

400 at Rs.9 each

500 at Rs.9 each

Rani

300 at Rs.21 each

200 at Rs.21 each

Raja

600 at Rs.9 each

700 at Rs.9 each

Rani
500 at Rs.21 each
400 at Rs.21 each
Market studies reveal that toy 'raja' is popular as it is under priced. It is observed that if its price is reduced by Rs.1 it
will find a ready market. On the other hand 'rani' is over priced and market could absorb more sales if its selling price
is reduced to Rs.20. The management has agreed to give effect to the above price change.
On the above basis, the following estimates have been prepared by sales manager:
% increase in sales over current budget
Product

Agra

Mumbai

Raja

+10%

+5%

Rani
+20%
+10%
With help of an intensive advertisement compaign, the following additional sales above the estimated sales of sales
manager are possible:
Product
Agra
Mumbai
Raja

60 units

70 units

Rani
40 units
50 units
You are required to prepare a budget for sales incorporating the above estimates
Q2 the onida savak ltd. Plans to sell 108000 units of a certain product in first quarter, 120000 units in second quarter,
132000 units in third quarter, 156000 units in fourth quarter and 138000 units in the first quarter of the following year.
At the beginning of the first quarter of the current year, there are 18000 units within stock at the end of each quarter.
The company plans to have an inventory equal to one-sixth of the sales for the next quarter. How many units must be
manufactured in each quarter of the current year if:
a) There is no loss in production.
b) There is loss of production at 4% , 2% , 5% and 3% in first ,second, third and fourth quarter respectively.
Q3 the sales manager of akash ltd. Expects to sell 54000 units of a certain product. The production manager consults
the storekeeper and estimates that two kind of raw material. A and B are required for manufacturing the product. Each
unit of product requires 2 units of A and 3 units of B.
Estimate stocks of material for budget period as follows:
Finished stock (Units)
Material A (Units)
Material B (Units)
At commencement

10000

12000

15000

At end
14000
13000
Draw up the material requirement budget for the next year.

16000

Q4 Prepare a flexible budget for production of 80% and 100% capacity on the basis of the following information :
Production at 50% capacity 5000 units
Raw Material Rs.80 per unit
Direct labour Rs.50 per unit
Direct Expenses Rs.15 per unit
Factory Expenses Rs. 50000 (of which 50% are fixed)
Administration Expenses Rs. 60000 (of which 40% are fixed)

Q5 The budget manager of cosmetics limited is preparing a budget for the accounting year starting from 1 st July 2007.
As part of the budget operation, some items of factory overhead costs have been estimated by him under
specified conditions of volume as follows :
Volume of production (Units)
Expenses

120000

150000
Rs.

Rs.

Indirect material

264000

330000

Indirect labour

150000

187500

Maintenance

84000

102000

Supervision

198000

234000

Engineering services
94000
94000
Calculate the cost of factory overhead item given above at 140000 units of production.
Q6 For the production of 10000 electric automatic irons the following are the budgeted expenses:
particulars
Per unit
Direct material

60

Direct labour

30

Variable overhead

25

Fixed overhead (Rs. 150000)

15

Variable expenses (direct)

Selling expenses (10% fixed)

15

Administration expenses (Rs. 50000 rigid for all levels of production)

Distribution expenses(20% fixed)

5
Prepare a budget for production of 6000, 7000 and 8000 irons, showing distinctly marginal cost and total cost.
Q7 A flexible budget at 60%, 80% and 100% production capacity is to be prepared from the following information
relating to the productive activities of shree engineering company ltd, Mumbai for the three months ended 31 st march
2010:
Rs.
Fixed Expenses
Management salaries
Rent & taxes
Depreciation on machinery
Sundry office cost
Semi-variable expenses at 50% capacity
Plant maintenance
Indirect Labour
Salesman's Salaries and Expenses
Sundry Expenses

42000
28000
35000
44500

12500
49500
14500
13000

Variable Expenses at 50% Capacity

Material
120000
Labour
128000
Salesman's Commission
19000
Semi-Variable expenses remain constant between 40% and 70% capacity, increase by 10% of the above figures
between 70% and 85% capacity and increase by 15% of the above figures between 85% and 100% capacity. Fixed
expenses remain constant whatever the level of activity. Sales at 60% capacity are Rs.510000, at 80% capacity
Rs.680000 and at 100% capacity Rs.850000. It is assumed that all items produced are sold.