Fixed Budget:

Q. A firm has a contract to supply 10,000 units of its only one product during Yr.
2023. The following information is related to budgeted expenses and revenue.

Materials Rs. 20 per Unit

Wages Rs. 10 per Unit

Work Expenses: Fixed Rs. 50,000/-.

: Variable Rs. 5 per Unit

General Expenses (all fixed) Rs.40,000.

Profit is 20% of the sales price. Prepare the budget for Yr. 2023 showing cost and
profit.

Flexible Budget:

Q. From the following data, prepare a flexible budget for the production of 40,000
units, and 75,000 units distinctly showing variable cost and fixed cost as well as
the total cost. Also, indicate element-wise cost per unit. The budgeted output is
100,000 units and the budgeted cost per unit is as follows:

Direct Material Rs. 95

Direct Labor Rs. 50

Production Overheads (Variable) Rs. 40

Production Overheads (Fixed) Rs. 5

Administration Overheads(Fixed) Rs. 5

Selling Overheads(10% Fixed) Rs. 10

Distribution Overheads(20% Fixed) Rs. 15

Q. Draw a flexible budget for production at 75% and 100% capacity on the basis of
the following data for 50% activity.

Direct Materials Rs. 100 per unit

Direct Labor Rs. 60 per unit

Direct Expenses Rs. 20 per Unit

Administrative Expenses (50% Fixed) Rs. 80,000

Selling & Distribution Expenses (60% Fixed) Rs. 100,000

Fixed Expenses:

Depreciation Rs. 10,000

Insurance Rs. 5000

Present Production ( 50% Activity) 1000 Units

Q. ABC Ltd. manufactures 5000 units of product PT cost Rs. 90 per unit. Presently,
the company is utilizing 50% of the total capacity. The information pertaining to
cost per unit of the product is as follows:

Materials Rs. 50

Labor Rs. 15

Factory Overheads Rs. 15 (40% Fixed)

Administrative Overheads Rs. 10 (50% Fixed)

Other Information:

a) The current selling price of the product is Rs. 100 per unit.
b) The 60% capacity level – Material cost per unit will be increased by 2% and
the current selling price per unit will be reduced by 2%.
c) At 80% capacity level - Material costs per unit will be increased by 5% and
the current selling price per unit will be reduced by 5%.
d) The fixed cost increase by Rs. 5000 at 85% capacity and above.

Prepare the flexible budget for 60%, 80% and 90% capacity.

Q. A factory is currently working at 50 % capacity and produces 10,000 units.

Estimates the profit of the company when it works at 60% and 80% capacity .

At 50% working raw materials cost increased by 2% and selling price fell by 2%. At
80% working raw material cost increased by 5% and selling price decreased by
5%.

At 50% working the product cost is Rs. 180 per unit and is sold at Rs. 200 per unit.
The Unit cost of Rs. 180 is made up of as follows:

Material Cost Rs. 100/-

Labor Cost Rs. 30/-

Factory Overheads Rs. 30/-(40% Fixed)

Administrative Overheads Rs. 20/- (50% Fixed)

Sales Budget:

Q. ABC Ltd. submits the following information/figures of product X for the 1 st

quarter 2022.

Month Sale(Units)

January 10,000

February 8,000

March 12,000

Selling Price per unit was Rs. 100/-

Target of 1st Quarter of Yr. 2023

Sales units increased by 25%.

Selling Price per unit increased by 10%.

A study of the past experience reveals that ABC Ltd. co. has lost about 3% of the
billed revenue in each quarter because of returns constituting 2% of loss revenue
allowances and bad debts 1% loss.

Prepare a sales budget for the 1st Quarter of Yr. 2023.

Q. ABC Ltd. introduces two brands namely Brand A and Brand B in the market is
classified into 3 divisions North, South and Central. The estimated sales in units
for the current year is as follows:

The price od sales per unit area is Rs. 18 and Rs. 9.

Brand North South Central

A 15,000 21,200 33,000

B 11,000 6000 9000

The sales are expected to increase by 5%, 10% and 15%. To push up the sales
during the period , it is proposed to give sample advertisement for Brand A: 500,
1000 and 600 Units. For Brand B: 300, 1000 and 1200 units.

Prepare sales budget.

Cash Budget:

Q. From the following budget data, forecast cash position at the end of April, May,
and June

Misc.
Month Sales Purchases Wages
Expenses
February 120,000 84,000 10,000 7,000

March 130,000 100,000 12,000 8,000

April 80,000 104,000 8000 6000

May 116,000 106,000 10,000 12,000

June 88,000 80,000 8,000 6,000

Additional Information:

Sales: 20% realized in the month of sales, discount allowed 2%, and Balance
realized equally in two subsequent months.

Purchases: These are paid in the month following the months of supply.

Wages: 25% paid in arrears following month.

Misc. Expenses: Paid a month in arrears.

Rent: Rs. 1000 per month paid quarterly in advance due in April.

Income Tax: First installment of advance tax Rs. 25,000 due on or before 15Th June.

Income from Investment: Rs. 5000 received quarterly, in April, July etc.

Cash in hand: Opening Balance on 1st April 2024 Rs. 5000.

Q. From the following information prepare a cash budget for the six months ended
30Th June 2024 of ABC Ltd.

Estimated Revenue and Expenditure

Selling &
Production
Month Sales Materials Wages Distribution
Overheads
Overheads
Dec-23 22000 16000 4000 3000 700
Jan-24 20000 20000 4000 3200 800
Feb-24 22000 14000 4400 3300 900
Mar-24 24000 14000 4600 3300 800
 Apr-24 26000 12000 4600 3400 900
May-24 28000 12000 4800 3500 900
Jun-24 30000 16000 4800 3600 1000

Cash balance on 1st January was Rs. 10,000. A new machine is to be installed at
Rs. 30,000 on credit to be repaid in two months in two equal installments in March
2024 & April 2024. Sales commission at 5 % on total sales is to be paid within the
month following actual sales. Rs. 1000 being the amount of second call may be
received in March 2024. Share premium amounting to Rs. 2000 is also obtainable
with second call. Period of credit allowed by supplier is 1 month. Period of credit
allowed to customers is 1 month. Delay in payment of overheads is 1 month. Delay
in payment of wages is ½ month. Assume cash sales to be 50% of the total sales.

Q. Sony ltd. a newly started company wishes to prepare a cash budget from
January with the following information.

(All values in Rs.)

Production
Months Sales Selling
Materials Wages O/H
O/Hs.
January 20000 20000 4000 3200 800
February 22000 14000 4400 3300 900
March 28000 14000 4600 3400 900
April 36000 22000 4600 3500 1000
May 30000 20000 4000 3200 900
June 40000 25000 5000 3600 1200

Cash balance on 1st January was Rs. 10,000. A new machine is to be installed at
Rs. 20,000 on credit to be repaid in two months in two equal installments in March
& April. Sales commission at 5 % on total sales is to be paid within the month
following actual sales. Rs. 10000 being the amount of second call may be received
in March. Share premium amounting to Rs. 2000 is also obtainable with second
call. Period of credit allowed by supplier is 2 month. Period of credit allowed to
customers is 1 month. Delay in payment of overheads is 1 month. Delay in
payment of wages is ½ month. Assume cash sales to be 50% of the total sales.
Q. ABC Ltd. is preparing its cash budget for the year 2020-2021. An extract from its
budget for the same year shows the following values:

Month Sales(Rs.) Purchases (Rs.) Wages (Rs.)

April’20 150,000 50,000 10,000

May’20 180,000 60,000 12,000

June’20 140,000 65,000 13,000

July’20 150,000 70,000 14,000

Additional Information:

a. 40% of its sales are expected to be for cash. Of its credit sales, 50% are
paid in the month after the month of sales, and the remaining 50% are
expected to be paid in the second month after the month of the sales.
b. The company has estimated to pay 50% of the total materials in cash, and
the remaining amount will be paid in the following month.
c. Wages are paid on the 2nd day of the following month.
d. The opening balance of cash as on 1st May 2020 is Rs. 30,000

Prepare a cash budget for the period May to July.

Based on CVP Analysis:

Q. ABC Ltd. has prepared the following budget estimates for the year 2022-23:

Sales Units 150,000

Sales (Rs.) 15,00,000

Fixed Expenses (Rs.) 340,000

Variable Cost/Unit(Rs.) 6

You are required to calculate:

a. P/V Ratio
b. Break-Even Point(Rs.)
c. Margin of Safety (Rs.)
d. Also calculate the revised P/V ratio, Break-even point and margin of safety,
If the selling price per unit is reduced by 10%.
Q. The following information was obtained from a company for the month of
January.

Sales Rs. 20,000

Variable Cost Rs. 10,000

Fixed Cost Rs. 6000

a. Find PV Ratio, Break-Even Point, and Margin of Safety. Also find the effect
of:
b. 20% decrease in fixed cost
c. 10% increase in fixed cost.
d. 10% decrease in variable cost
e. 10% increase in selling price.
f. 10% increase in selling price along with an increase in fixed overheads by
Rs. 1200.
g. 10% decrease in sales price
h. 10% decrease in sales price accompanied by 10% decrease in variable
cost.

Q. ABC Ltd. furnishes the following information relating to the half yr. ending 30 th
Sept 2023.

Particulars Rs.

Fixed Expenses 50,000

Sales Value 200,000

Profit 50,000

During the second half of the same year the company projected a loss of Rs.
10,000. Calculate:

a. The P/V Ratio, Break-Even Point, and Margin of Safety for six months ending
30th Sept. 2023.
b. Expected Sales Volume for the second half of the year, assuming that
selling price and fixed expenses remain unchanged in the second half year
also.
c. The break-even point and margin of safety for the whole year 2023-2024.

# Note: A Sufficient number of Questions, including all kinds of variations

based on Cost Sheet, Absorption Costing and Marginal Costing, have already
been done in the class, as well as additional questions shared at the time of
Mid-Term examination, are enough for practice.
Standard Costing

Q. The standard material cost to produce a tonne of Chemical X is:

300 kg Material A @ Rs. 10 per Kg

400 kg Material B @ Rs. 5 per Kg

500 kg. Material C @ Rs. 6 per Kg.

During a period, 100 tonnes of chemical X was produced from the usage of :

35 Tonnes Material A @ Rs. 9000 per tonne

42 Tonnes Material B @ Rs. 6000 per tonne

53 Tonnes Material C @ Rs. 7000 per tonne

Perform: Material Cost Variance Analysis in detail.

Q. A gang of workers normally consist of 30 men, 15 women, and 10 boys. They are
paid at standard rates per hr. as follows:

Men Rs. 80 per hr.

Women Rs. 60 per hr.

Boy Rs. 40 per hr.

In a normal working week of 40 hrs., the gang is expected to produce 2000 units of
output.

During the week ending 31st December 2023, the gang consisted of 40 men, 10
women, and 5 boys. The actual wages paid to them per hour on the following
basis:

Men Rs. 70 per hr.

Women Rs. 65 per hr.

Boy Rs. 30 per hr.

Actual units are produced by the gang, 1600 units

Perform: Labor Cost Variance Analysis in detail.

Q. Calculate all Labor Variance from the following Data:

Standard Actual
Standard Hourly Actual Hourly
Particulars Hours Rate Hours Rate
Skilled Labor 2880 20 1760 25
Semi-Skilled Labor 1920 10 2640 5
Total 4800 4400
Output (Kg) 108 90

Q. A manufacturing concern which has adopted standard costing furnishes the

following information:

Standard Finished Product 90 kg. and Standard Material used 135 kg. @ Rs. 12/kg.,

Actual output 81,000 kg

Actual Material used 124,000kg.

Cost of materials Rs. 14,75,600

Calculate: Material Cost Variance, Material Rate Variance, Material Usage

Variance. (5 Marks)

Q. For producing 80 units of a product 30 kg material X and 20 kg. of Material Y is

the standard requirement. The standard price is Rs. 6 per kg. of X and Rs. 10 per
kg of Y. 80 units were actually produced using 50 kg. of material X purchased at Rs.
200 and 10 kg of material Y purchased at Rs. 8 per kg.

Compute: Material Cost Variance, Material Rate Variance, and Material usage
Variance. (5 Marks)

Cost Sheet

Q. Consider the following information:

Direct material- Rs. 57,000

Direct wages- Rs. 28,500

Direct expenses – Rs. 10,000

Factory rent & rates- Rs. 4,500

Indirect wages Rs. 5,000

Plant repairs & maintenance Rs.1,000

Plant depreciation- Rs. 1,250

Factory heating & lighting- Rs. 400

Factory manager’s salary- Rs.2,000

Motive Charges- Rs. 4,600

Haulage- Rs. 3,500

Director Fees(Work/Factory)-Rs.1,500

Electricity Charges- Rs. 1,500

Fuel, Gas lubricants Etc- Rs. 1,000

Work Stationary- Rs 500

ESI-Rs. 600

Indirect Expenses- Rs. 700

Depreciation On Furniture Rs. 2,400

Water Supply_Rs. 1000

Loose Tools Written Off-Rs. 500

Estimating Expenses- Rs. 700

Drawing Office Salary- Rs 800

Office rent & rates- Rs. 500

Office Insurance- Rs. 700

Sundry office Expenses-Rs. 600

Office Salary- Rs.1,600

Director’s remuneration(office)Rs.1,500

Telephone & postage- Rs. 200

Printing & stationery- Rs.100

Legal charges- Rs. 150

Counting House Salary-Rs. 900

Audit fees- Rs. 800

Bank Charges-Rs. 700

Advertisement- Rs. 1,500

Salesmen’s salary- Rs. 2,500

Showroom rent- Rs. 500

Rent of Warehouse- Rs. 500

Commission on Sales – Rs. 1,920

Upkeep of Delivery Van-Rs. 600

Bad Debts- Rs. 200

Depreciation of Delivery Van-Rs.400

Sales- Rs. 1,60,000

Prepare Cost sheet by showing statement of Prime Cost, Factory Cost, Cost of
Goods Sold and Profit.