Given

Products P Q R
Selling Price 200 260 420
Raw Material (Kg) 0.5 1.2 2.5
Direct Material (Kg) 0.25
Skilled Labour Hours 4 6 8
Semi-Skilled Hours 2 2 3
Variable Overheads 40 80 80
Sales Mix 8 2 1

Particulars Raw Materials Direct Materials P Q R

Opening 600 400 400 100 50
Closing 650 260 200 300 50

Solution
Sales Budget in Quantity
Particulars P Q R
Selling Price 200 260 420
Variable Cost
Raw Material 100 50 120 250
Direct Material 40 10 0 0
Skilled Labour 6 24 36 48
Semi-Skilled Labour 5 10 10 15
Variable Overheads 40 80 80
Total Variable Cost 134 246 393
Contribution per unit 66 14 27
Sales Mix 8 2 1
Total Contribution 528 28 27 583

Desired Profit 120000

Add: Fixed Overheads 200000
Desired Contribution 320000
Number of Batches of P,Q and R 549
Sales Quantity P 4391
Q 1098
R 549

Sales Budget in Value

Particulars P Q R
Sales Quantity 4391 1098 549
Selling Price 200 260 420
Sales Value 878216 285420 230532

Production Budget
Particulars P Q R
Sales Quantity 4391 1098 549
Add: Closing Stock 200 300 50
Less: Opening Stock 400 100 50
Production Quantity 4191 1298 549

Raw Material Usage Budget

Particulars P Q R
Production Quantity 4191 1298 549
Raw Material Usage (Kg) 0.5 1.2 2.5
Total Raw Material Required 2096 1557 1372 5025
Direct Material Usage (Kg) 0.25
Total Direct Material Required 524 0 0 524

Material Purchase Budget

Particulars Raw Materials Direct Materials Total
Budgeted Usage 5025 524
Add: Closing Stock 650 260
Less: Opening Stock 600 400
Budgeted Purchases 5075 384
Price of Materials 100 40
Cost of Purchase 507508 15355 522863

Direct Labour Budget

Particulars P Q R Total
Production Quantity 4191 1298 549 6038
Skilled Labour Hours 4 6 8
Total Skilled Labour Hours Reqd. 16764 7787 4391 28942
Cost of Skilled Labour 100586 46720 26346 173652
Number of Skilled Workers Reqd 84 39 22 145 200

Semi-Skilled Labour Hours 2 2 3

Total Semi-Skilled Labour Hrs Reqd 8382 2596 1647 12624
Cost of Semi-Skilled Labour 41911 12978 8233 63122
Number od Semi-Skilled Workers 42 13 8 63
COGS=Op Stock + Purchases - Cl Stock
Purchases = Sales + Cl Stock - Op Stock
 Continuous Assessments
Management Accounting

Flexible Budget for the period…...

Capacity (In %age)
Particulars 70% 80% 100%
Variable Cost
Direct Labour 15750 18000 22500
Material Cost 5250 6000 7500
Total Variable Cost 21000 24000 30000

Semi-Variable Cost
Power - Fixed (30%) 12000 12000 12000
Power - Variable (70%) 24500 28000 35000
Repairs & Maintenance - Fixed (80%) 4800 4800 4800
Repairs & Maintenance - Variable (20%) 1050 1200 1500
Total Semi-Variable Cost 42350 46000 53300

Fixed Cost
Depreciation 11000 11000 11000
Insurance 5000 5000 5000
Salary 10000 10000 10000
Total Fixed Cost 26000 26000 26000

TOTAL COST 89350 96000 109300

 Flexible Budget
60000
50000
40000
30000
20000
10000
0
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Column 70%
B Column C
80% 100% D
Column

Range to change budget by any percentage -

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Note -
Select any value from dropdown option on cell B7, to change value of capacity.
Opening Debtors 30000
Opening Creditors 14000
Opening Cash Balance 7500
Opening Stock Balance 51000
Accrued Sales Commission 3500

Working Notes
Particulars April May June July August
Sales 40000 45000 55000 60000 50000
Cash Sales (40%) 16000 18000 22000 24000 20000
Credit Sales (60%) 24000 27000 33000 36000 30000
Cost of Sales (60% of Sales) 24000 27000 33000 36000 30000
Add: Closing Stock 60000 69000 66000
84000 96000 99000
Less: Opening Stock 51000 60000 69000
Purchases 33000 36000 30000

CASH BUDGET
Particulars April May June
Opening Balance 7500 33000 37000
Add: Receipts
Cash Sales (40% of Sales) 16000 18000 22000
Receipt from Debtors (1
Month after Credit Sales) 30000 24000 27000
Total Receipts 53500 75000 86000

Payments
Payment to Creditors 14000 33000 36000
Fixed Cost 3000 3000 3000
Commission (5% of Previous
Month Sales) 3500 2000 2250
Total Payments 20500 38000 41250

Closing Balance 33000 37000 44750

 35000
30000
25000
R
u 20000
p
e 15000 Row 11
e
s Row 12
10000
5000
0
April May June
Cash and Credit Sales
COGS = Op Stock + Purchases - Cl Stock
Purchases = COGS + Cl Stock - Op Stock
Solution
Packs - Export 6000
Packs - Domestic 20000

Incremental Approach

Cost Benefit Analysis of Export Order

Particulars Cost Benefits
Export Sales (6,000 Packs at Rs.30 per pack) 180000
Savings in Maintenance Cost 1000
Differential Cost
Direct Material 10 60000
Direct Labour 7 42000
Variable Factory Overheads 4 24000
Variable Office & Selling Overheads 3 18000
Additional Fixed Cost 10000
Rental Income Foregone 9000
Total 163000 181000

Incremental Benefits 18000

Total Profit Approach

Option 1: Reject the export offer and sell in home market.
Option 2: Accept the export offer and sell in both the markets.

Option 1 - Packs Sold 20000

Option 2 - Packs Sold 26000

Particulars Option 1 Option 2

Domestic Sales 60 1200000 1200000
Export Sales 30 180000
Rental Income 9000
Total Revenue 1209000 1380000

Variable Cost
Direct Material 10 200000 260000
Direct Labour 7 140000 182000
Variable Factory Overheads 4 80000 104000
Variable Office & Selling Overheads 3 60000 78000
Maintenance Cost 1000
Total Variable Cost 481000 624000

Fixed Cost
Factory 12 240000 240000
Office & Selling 6 120000 120000
Additional Fixed Cost 10000
Total Fixed Cost 360000 370000
Total Cost 841000 994000

Profit (Total Revenue - Total Cost) 368000 386000

Solution
Cost Benefit Analysis of Export Order
Particulars Cost Benefits
Offered Selling Price 250
Variable Costs
Direct Material 160
Direct Labour 20
Variable Overheads 50
Royalty 10
Central Excise Duty 30
Total 270 250

Offer should not be accepted because the benefit is less than the cost.

(B)
Particulars Amount
Selling Price 345
Less: Profit 50
Less: Variable Selling Overheads 5
Price to be quoted 290
Selling Price 700
Fixed Cost 84000
Variable Cost 420
Contribution 280 CVP Cha
P/V Ratio 0.4 Contribution/Sales
600000
500000
Table of Predicted Cost and Revenue 400000
Units Fixed Cost Variable Cost Total Cost Total Revenue 300000
Total COST &
0 84000 0 84000 0 TOTAL REVENUE
200000 210
100 84000 42000 126000 70000
140000
200 84000 84000 168000 140000 100000
70000
300 84000 126000 210000 210000 0 0
400 84000 168000 252000 280000 100 200 300 400 50
500 84000 210000 294000 350000 UNITS
600 84000 252000 336000 420000
700 84000 294000 378000 490000

BEP (In Units) TFC/Contribution 300

BEP (In Value) TFC/PV Ratio 210000

Income Statement
Sales (300 Units) 210000
Less: VC 126000
Contribution 84000
Less: TFC 84000
Profit 0
 CVP Chart
600000
500000 490000
400000 420000
350000 Total Cost
& 300000 280000
NUE Total Revenue
200000 210000
140000
100000
70000
0 0
100 200 300 400 500 600 700
UNITS
Initial Projection

Selling Price 850

Units Sold 500
Variable Cost P/u 250
Variable Cost 125000
Fixed Cost 10000
Revenue 425000
Profit 290000

Part 1
Case 1 Case 2 Case 3
Selling Price 270 Selling Price 850 Selling Price
Units Sold 500 Units Sold 16.66667 Units Sold
Variable Cost P/u 250 Variable Cost P/u 250 Variable Cost P/u
Variable Cost 125000 Variable Cost 4166.667 Variable Cost
Fixed Cost 10000 Fixed Cost 10000 Fixed Cost
Revenue 135000 Revenue 14166.67 Revenue
Profit 0 Profit 0 Profit

Part 2

Units Sold Profit

290000
500 290000
600 350000
700 410000
800 470000

Part 3

Selling Price 850

Units Sold 500
Variable Cost P/u 250
Variable Cost 125000
Fixed Cost 10000
Revenue 425000
Profit 290000
 Case 4
850 Selling Price 850
500 Units Sold 500
830 Variable Cost P/u 250
415000 Variable Cost 125000
10000 Fixed Cost 300000
425000 Revenue 425000
0 Profit 0
Scenario Summary
Current Values: Worst Better Best
Changing Cells:
$B$33 850 700 860 1000
$B$34 500 300 600 800
$B$35 250 350 280 200
Result Cells:
$B$39 290000 95000 338000 630000
Notes: Current Values column represents values of changing cells at
time Scenario Summary Report was created. Changing cells for each
scenario are highlighted in gray.