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Flexible budget (Marginal cost)
Following are the budgeted expenses for production of an electronic component of TV (10,000 units):
Direct materials
50
Direct labour
20
Variable overheads
Fixed overheads (Rs. 1,00,000)
10
Variable expenses (Direct)
5
Selling expenses (10% fixed)
Distribution expenses (20% fixed)
Administration expenses (Rs. 50,000)
Total cost of sale per unit (to make and sell)
125
Prepare a budget for production of (a) 7,000 units and (b) 9,000 units, showing distinctly marginal cost and total cost. Assume that the administration expenses are rigid for all levels of production.
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