BT Ltd. achieves sale of 73,12,500 with COGS of 40% while operating at 75% of its normal capacity during the current financial year. The information…

CA Intermediate · Cost and Management Accounting · RTP · January 2025
BT Ltd. achieves sale of 73,12,500 with COGS of 40% while operating at 75% of its normal capacity during the current financial year. The information relating to Administration, Selling and Distribution costs is given below: Administration costs: Office salaries:11,70,000 General expenses: 5 per cent of COGS Depreciation:97,500 Rates and taxes:1,13,750 Selling costs: Salaries: 8 per cent of sales Travelling expenses: 5 per cent of COGS Sales office expenses: 2.5 per cent of COGS General expenses: 2.5 per cent of COGS Distribution costs: Wages:1,95,000 Rent: 1 per cent of sales Other expenses: 10 per cent of COGS Considering some of the expenses like office salaries, depreciation, rates and taxes, and wages, to remain the same irrespective of the level of activity, as these expenses are fixed in nature, PREPARE flexible administration, selling and distribution costs budget, operating at 85%, 100% and 115% of normal capacity.

Suggested Answer and Working Notes:

Flexible Budget of BT Ltd. Particulars 75% (₹) 85% (₹) 100% (₹) 115% (₹) Sales 73,12,500 82,87,500 97,50,000 1,12,12,500 COGS (40% of Sales) 29,25,000 33,15,000 39,00,000 44,85,000 Administration Costs: Office Salaries (fixed) 11,70,000 11,70,000 11,70,000 11,70,000 General expenses (5% of COGS) 1,46,250 1,65,750 1,95,000 2,24,250 Depreciation (fixed) 97,500 97,500 97,500 97,500 Rent and rates (fixed) 1,13,750 1,13,750 1,13,750 1,13,750 (A) Total Adm. Costs 15,27,500 15,47,000 15,76,250 16,05,500 Selling Costs: Salaries (8% of sales) 5,85,000 6,63,000 7,80,000 8,97,000 Travelling expenses (5% of COGS) 1,46,250 1,65,750 1,95,000 2,24,250 Sales office (2.5% of COGS) 73,125 82,875 97,500 1,12,125 General expenses (2.5% of COGS) 73,125 82,875 97,500 1,12,125 (B) Total Selling Costs 8,77,500 9,94,500 11,70,000 13,45,500 Distribution Costs: Wages (fixed) 195,000 195,000 195,000 195,000 Rent (1% of sales) 73,125 82,875 97,500 1,12,125 Other expenses (10% of COGS) 2,92,500 3,31,500 3,90,000 4,48,500 (C) Total Distribution Costs 5,60,625 6,09,375 6,82,500 7,55,625 Total Costs (A + B + C) 29,65,625 31,50,875 34,28,750 37,06,625

Topics: Budgets and Budgetary Control

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic