BUDGETARY CONTROL<br />BY<br />ANIMESH KALITA<br />2K10MKT37<br />
PRODUCTION COST BUDGET<br />THE PRODUCTION BUDGET SHOWS BOTH UNIT PRODUCTION DATA AND UNIT COST DETAILS.<br />THIS BUDGET ...
NUMERICAL<br />    The following information has been made available from the records of Precision Tools Ltd. for the six ...
(ii) There will be no work-in-progress at the                                    end of any month.<br />(iii) Finished uni...
    You are required to prepare:<br />Production Budget for the six months of 1998.<br />Summarized Production Cost Budget...
PRODUCTION BUDGETfor the six months ending Dec, 1998<br />
PRODUCTION COST BUDGETfor the six months ending Dec, 1998<br />
FLEXIBLE BUDGET<br />FLEXIBLE BUDGETING HAS BEEN DEVELOPED WITH THE OBJECTIVE OF CHANGING ATHE BUDGET FIGURES TO CORRESPON...
NUMERICAL<br />      The expenses budgeted for production of 10,000 units in a factory are furnished below:<br />         ...
FLEXIBLE BUDGET<br />
REVISION OF BUDGETS<br />     Sometimes the original budget prepared may have to be revised due to one or more of the foll...
NUMERICAL<br />       A Company produces two products and budgets at 60% level of activity for the year 2,000. It gives th...
    Working Note : Revised Sales figures are computed as follows:<br />                                                   ...
THANK YOU<br />
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Budgets

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Budgets

  1. 1. BUDGETARY CONTROL<br />BY<br />ANIMESH KALITA<br />2K10MKT37<br />
  2. 2. PRODUCTION COST BUDGET<br />THE PRODUCTION BUDGET SHOWS BOTH UNIT PRODUCTION DATA AND UNIT COST DETAILS.<br />THIS BUDGET SHOWS ESTIMATED COST OF PRODUCTION.<br />IT SHOWS OF PRODUCTION WHICH ARE IN RESPECT OF MATERIAL COST, LABOR COST AND FACTORY OVERHEAD.<br />
  3. 3. NUMERICAL<br /> The following information has been made available from the records of Precision Tools Ltd. for the six months of 1998(and the sales of January 1999) in respect of product X;<br /> (i) The units to be sold in different months:<br /> July 1998 1,100 November 1998 2,500<br /> August 1,100 December 2,300<br /> September 1,700 January 1999 2,000<br /> October 1,900 <br />
  4. 4. (ii) There will be no work-in-progress at the end of any month.<br />(iii) Finished units equal to half the sales of the next month will be in stock at the end of evry month (including June, 1998).<br />(iv) Budgeted production and production cost for the year ending 31st Dec, 1998 are:<br /> Production (units) 22,000<br /> Direct materials per unit Rs. 10<br /> Direct wages per unit Rs. 4<br /> Total factory o/h apportioned Rs. 88,000<br /> to production<br />
  5. 5. You are required to prepare:<br />Production Budget for the six months of 1998.<br />Summarized Production Cost Budget for the same period.<br />
  6. 6. PRODUCTION BUDGETfor the six months ending Dec, 1998<br />
  7. 7. PRODUCTION COST BUDGETfor the six months ending Dec, 1998<br />
  8. 8. FLEXIBLE BUDGET<br />FLEXIBLE BUDGETING HAS BEEN DEVELOPED WITH THE OBJECTIVE OF CHANGING ATHE BUDGET FIGURES TO CORRESPOND WITH THE ACTUAL OUTPUT ACHIEVED.<br />THESE BUDGETS NECESSITATES THE ANALYSIS OF ALL COSTS INTO FIXED AND VARIABLE COMPONENTS.<br />IN THIS BUDGET, A SERIES OF BUDGETS ARE PREPARED FOR EVERY MAJOR LEVEL OF ACTIVITY.<br />
  9. 9. NUMERICAL<br /> The expenses budgeted for production of 10,000 units in a factory are furnished below:<br /> Rs. Per unit<br /> Materials 70<br />Labour 25<br /> Variable overheads 20<br /> Fixed overheads(Rs. 1,00,000) 10<br /> Variable expenses(direct) 5<br /> Selling expenses(10% fixed) 13<br /> Distribution expenses(20% fixed) 7<br /> Administration expenses(Rs. 50,000) 5<br /> ―<br /> Total 155 <br /> Prepare a budget for the prod. Of (a) 8,000 units and (b) 6,000 units.<br /> Assume that administration expenses are rigid for all levels of production.<br />
  10. 10. FLEXIBLE BUDGET<br />
  11. 11. REVISION OF BUDGETS<br /> Sometimes the original budget prepared may have to be revised due to one or more of the following factors:<br />Changes in mgmt policies and other internal factors like change in the capacity utilisation or addition to the production capacity, etc.<br />Unforeseen changes in uncontrollable or external factors like change in market prices of materials and other inputs, changes in fashion and consumer tastes, etc.<br />Errors committed in the preparation of original budget.<br />
  12. 12. NUMERICAL<br /> A Company produces two products and budgets at 60% level of activity for the year 2,000. It gives the following information : <br /> Product A Product B<br /> Raw materials cost Rs. 7.50 Rs. 3.50 <br /> per unit<br /> Direct wages per unit Rs. 4.00 Rs. 3.00<br />Var o/h per unit Rs. 2.00 Rs. 1.50<br /> Fixed o/h per unit Rs. 6.00 Rs. 4.50<br /> Selling price per unit Rs. 20.00 Rs. 15.00<br /> Production and sales(units) 4000 6000<br /> The managing director is not satisfied with the budgeted results as stated above and wants to improve the performance. The managing director proposed that the sales quantities of products A and B could be increased by 50% provided the SP was reduced by 5% in the case of product A and 10% in product B. The price reduction should be made applicable to the entire quantity of sales of each of the two products.<br /> You are required to present the overall profitability under the original budget and revised budget after taking the increased sales into consideration.<br />
  13. 13.
  14. 14. Working Note : Revised Sales figures are computed as follows:<br /> A B<br /> Selling Price per unit Rs. 20 15<br /> Less : 5% and 10% Re. 1 1.50<br /> Rs. 19 13.50<br /> Sales Value = 6000 units × Rs. 19 = 114000<br /> = 9000 units × Rs.13.50= 121500<br />
  15. 15. THANK YOU<br />

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