Question

A company produces two products and budgets at 60% level of activity for the year 2015. It gives the following information:
Product AProduct B Raw material cost per unit ​Rs 7.50 3.50 Direct Wages per unit ​Rs 4.00 3.00
Variable overheads per unit Fixed Overheads per unit Selling Price per unit ​Rs Production and sales (units)
​Rs 2.00 1.50 ​Rs 6.00 4.50
20.00 15.00 4000 6000
6000 18000
30000 3000
16500
4500
15000
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 selling price was reduced by 5% in the case of Product A and 10% in the case of Product B. The price reduction should be made applicable to the entire quantity of sales of each of the two products.
You are required to present the overall profitability under the original (fixed) budget and revised (flexible) budget after taking the increased sales into consideration.

Answer 1

Answer:

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Answer 2

Answer:

want will the question wait a min