CMA Intermediate · Cost Accounting · Budget and Budgetary Control
Sharma Components Ltd budgets at 10,000 units: variable cost Rs 30 per unit and fixed cost Rs 2,00,000. What is the flexible budget total cost at 12,000 units?
The flexible budget total cost at 12,000 units is Rs 5,60,000. Variable cost rises with output to 12,000 x Rs 30 = Rs 3,60,000, while fixed cost remains Rs 2,00,000 within the relevant range, giving the total of Rs 5,60,000.
- ARs 5,60,000Correct
- BRs 5,00,000
- CRs 6,00,000
- DRs 3,60,000
Explanation
Variable cost at 12,000 units = 12,000 x 30 = Rs 3,60,000. Fixed cost stays at Rs 2,00,000. Total = Rs 5,60,000. Rs 6,00,000 wrongly scales fixed cost too (5,00,000 x 1.2); Rs 5,00,000 is the original budget; Rs 3,60,000 omits fixed cost.
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