1. Flexible and static budgets
Problem 1:
The monthly budgets for manufacturing overheads of concerns are as follows.
Capacity budgeted production (units)
60%
100%
600
1000
Rs.
Rs.
Wages
1200
2000
Consumable stores
900
1500
Maintenance
1100
1500
Power and Fuel
1600
2000
Depreciation
4000
4000
Insurance
1000
1000
Required:
I.
Indicate which of items are fixed, variable and semi variable.
II.
Prepare a budget for 80% capacity level.
Problem 2:
The monthly budgets for manufacturing overheads of concerns are as follows.
Capacity budgeted production (units)
60%
1200
Rs.
2400
1800
2200
3200
8000
2000
100%
2000
Rs.
4000
3000
3000
4000
8000
2000
Wages
Consumable stores
Maintenance
Power and Fuel
Depreciation
Insurance
Required:
I.
Indicate which of items are fixed, variable and semi variable.
II.
Prepare a budget for 80% capacity level.

2. Problem 3:
Capacity budgeted production (units)
80%
2,000
Rs.
Rs.4,000
900
800
1,000
3,000
1,000
100%
2,500
Rs.
Rs.5,000
1,000
900
1,250
3,000
1,200
Direct labor
Utilities
Supplies
Indirect labor
Depreciation of machinery
Misc. expenses
Required:
Prepare the allowable flexible budget on the assumption that 2,600 units were produced.
Problem 4:
Fixed
direct material
direct labor
supervision
indirect material
property tax
maintenance
power
insurance
depreciation
Required:
Prepare a flexible budget at 92% level.
Rs.500
250
300
600
200
175
1,600
Total cost
80%
Rs.16,000
9,000
500
1,450
300
1,400
280
175
1,600
100%
Rs.20,000
11,250
500
1,750
300
1,600
300
175
1,600

3. Problem 5
Prepare a flexible budget for 90,000 units.
production in units
sales
cost of goods sold
gross profit
operating expenses (Rs. 90,000 fixed)
operating income
income taxes (30% of operating income)
net income
70,000
Rs.1,400,000
840,000
560,000
370,000
190,000
57,000
133,000
80,000
90,000
Rs.1,600,000 Rs.
960,000
640,000
410,000
230,000
69,000
161,000
Problem 6:
Prepare a flexible budget at 50% and 70% capacities. The following particular is at
60% capacity level.
variable overheads
indirect labor
indirect material
semi variable cost
electricity (40% fixed)
repair and maintenance (20% variable)
fixed overhead
depreciation
insurance
salaries
total
Rs.
6,000
18,000
30,000
3,000
16,500
4,500
15,000
93,000

4. Problem 7:
The following data is at 60% capacity level. Prepare the budget at 80% and 100%
level. Production at 60% capacity level 600 units.
Materials
Labor
Expenses
factory expenses (40% are fixed)
Administrative expenses (60% fixed)
Rs.
100 per unit
40 per unit
10 per unit
40,000
30,000
Problem 8:
The controller of the ABC Corporation decided to prepare a flexible budget ranging from
80% to 100% of capacity level for the next year with 50,000 hours as the 100% activity
level. The direct labor rate is Rs. 7.50 per hour.
Annual fixed expenses
Rs.
Depreciation
9,000
Insurance
1,500
Maintenance cost
24,000
Property taxes
1,500
Supervisor salary
36,000
Variable expenses
Shop supplies
0.10 per D/L Hour
Indirect labor
0.45 per D/L Hour
Payroll taxes and benefits
18% of labor cost
Semi variable expenses (from five years)
Year
D/L hour
Power and light
Inspection
1
44,000
Rs.15,000
Rs.9,200
2
40,000
1,400
9,000
3
45,000
1,600
9,200
4
49,000
1,650
10,000
5
50,000
1,700
10,200
Required:
Prepare a flexible budget at 80%, 90% and 100% capacity level.
Other expenses
Rs.8,000
7,500
8,200
8,800
8,900