CMA Intermediate · Cost Accounting · Budget and Budgetary Control
A firm's fixed budget for 5,000 units shows sales Rs 10,00,000, variable cost Rs 6,00,000 and fixed cost Rs 2,00,000. Actual output was 4,000 units. If the budget is flexed to the actual output, what is the budgeted profit allowed for 4,000 units?
Flexed profit is Rs 1,20,000, but this is not among the options, so the question is flawed.
- ARs 1,60,000Correct
- BRs 2,00,000
- CRs 0
- DRs 80,000
Explanation
Flexed sales = 4,000 x Rs 200 = Rs 8,00,000. Flexed variable cost = 4,000 x Rs 120 = Rs 4,80,000. Contribution = Rs 3,20,000; less fixed cost Rs 2,00,000 gives Rs 1,20,000. Check: this is Rs 1,20,000, so the first option is wrong and must be recomputed: the correct profit is Rs 1,20,000, which is not listed.
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