CA Intermediate · Cost and Management Accounting · Budgets and Budgetary Control
Kaveri Textiles budgets production and sales of 8,000 units. Budgeted variable cost is Rs. 60 per unit and budgeted fixed cost is Rs. 1,20,000. Actual production and sales are 9,000 units. Under a flexible budget, what is the total budgeted cost for 9,000 units?
The flexible budget cost for 9,000 units is Rs. 6,60,000. Variable cost is flexed to 9,000 x Rs. 60 = Rs. 5,40,000, while fixed cost remains unchanged at Rs. 1,20,000 because it does not vary with activity within the relevant range.
- ARs. 5,40,000
- BRs. 6,60,000Correct
- CRs. 6,00,000
- DRs. 6,75,000
Explanation
Flexed variable cost = 9,000 x 60 = Rs. 5,40,000. Fixed cost stays at Rs. 1,20,000. Total = Rs. 6,60,000. Rs. 6,75,000 is wrong because it scales the fixed cost up with activity (Rs. 1,35,000).
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