Savi Limited is currently working at 80% of its capacity level and furnished the following information for current period: Production / Sales 96,000…
CA Intermediate · Cost and Management Accounting · PYQS · September 2024
Savi Limited is currently working at 80% of its capacity level and furnished the following information for current period: Production / Sales 96,000 unitsDirect Variable Cost 20 per unitFactory Overheads - 8,40,000Administrative Overheads (Fixed) ₹ 20,60,000Sales Commission 2% of Sales ValueTransportation Expenses - 4,000 per truck (Loading Capacity 4,000 units) The selling price of the product is 120 per unit and Factory Overheads are 80% variable in nature. The management of Savi Limited has come to know that there will be high fluctuations in the demand of the product in upcoming year and it would not be an easy task to predict the demand. Selling price per unit will not be affected by demand fluctuations. Savi Limited has decided to prepare a flexible budget for the product at 60%, 80% and 100% capacity level. You are required to prepare the Flexible Budget showing total cost of the product at each level.
Suggested Answer and Working Notes:
Flexible Budget of Savi Ltd 60% (72,000 units) 80% (96,000 units) 100% (1,20,000 units) (₹) (₹) (₹) Sales (A) 120.00 120.00 120.00 Variable Costs: Direct Variable Cost 20.00 20.00 20.00 Variable Factory Overheads (WN1) 7.00 7.00 7.00 Sales Commission (2%) 2.40 2.40 2.40 Transportation Expenses 1.00 1.00 1.00 Total Variable Cost (B) 30.40 30.40 30.40 Contribution Per Unit (C) = (A – B) 89.60 89.60 89.60 Total Contribution (D) 64,51,200.00 86,01,600.00 1,07,52,000.00 Fixed Costs: Administrative Overheads (100%) 20,60,000.00 20,60,000.00 20,60,000.00 Factory Overheads (20%) 1,68,000.00 1,68,000.00 1,68,000.00 Total Fixed Costs (E) 22,28,000.00 22,28,000.00 22,28,000.00 Profit (D-E) 42,23,200.00 63,73,600.00 85,24,000.00 Total Cost 44,16,800.00 51,46,400.00 58,76,000.00 WN1: Variable factory Overheads = 8,40,000 x 80% = 6,72,000 Variable factory Overheads per unit = 6,72,000/96,000 units = 7
Topics: Budgets and Budgetary Control
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