CMA Intermediate · Management Accounting · Forecasting, Budgeting and Budgetary Control
Sharma Plastics budgets for 10,000 units: variable cost Rs 30 per unit, fixed cost Rs 2,00,000. If the budget is flexed to 12,000 units, the total budgeted cost is:
Total flexed cost is Rs 5,60,000. Variable cost rises with activity to 12,000 x Rs 30 = Rs 3,60,000, while fixed cost stays at Rs 2,00,000 within the relevant range, so the two are added.
- ARs 5,60,000Correct
- BRs 6,00,000
- CRs 5,00,000
- DRs 5,20,000
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.
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