Flexible budget (Marginal cost)
Following are the budgeted expenses for production of an electronic component of TV (10,000 units):
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Direct materials
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50
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Direct labour
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20
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Variable overheads
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20
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Fixed overheads (Rs. 1,00,000)
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10
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Variable expenses (Direct)
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5
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Selling expenses (10% fixed)
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10
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Distribution expenses (20% fixed)
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5
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Administration expenses (Rs. 50,000)
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5
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Total cost of sale per unit (to make and sell)
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125
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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.