Binky Ltd manufactures one product, the Whirl. Currently it is operating at a normal level of...

 

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Binky Ltd manufactures one product, the Whirl. Currently it is operating at a normal level of activity of 60% which represents an output of 10080 units. However the sales director believes that a realistic forecast for the next budget period would be a level of activity of 45% Information: Direct materials Direct wages Production overhead Administration overhead Selling overhead Total cost Profit is 25% of selling price. 60% 70560 50400 50240 40000 53320 264520 70% 82320 58800 55280 40000 60040 296440 0% 94080 67200 60320 40000 66760 328360 Required: a. Prepare a budget based on a level of activity of 45% which should show the contribution which can be expected. 35 marks b. Explain responsibility accounting 10 marks c, Explain the difference between fixed and flexible budgets, and discuss why a company might decide to choose a flexible budgeting system. 15 marks Binky Ltd manufactures one product, the Whirl. Currently it is operating at a normal level of activity of 60% which represents an output of 10080 units. However the sales director believes that a realistic forecast for the next budget period would be a level of activity of 45% Information: Direct materials Direct wages Production overhead Administration overhead Selling overhead Total cost Profit is 25% of selling price. 60% 70560 50400 50240 40000 53320 264520 70% 82320 58800 55280 40000 60040 296440 0% 94080 67200 60320 40000 66760 328360 Required: a. Prepare a budget based on a level of activity of 45% which should show the contribution which can be expected. 35 marks b. Explain responsibility accounting 10 marks c, Explain the difference between fixed and flexible budgets, and discuss why a company might decide to choose a flexible budgeting system. 15 marks

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Working Note 1 1 2 3 4 5 Working Note 2 1 2 Solution 1 Classification of various costs as Varia... View the full answer