Azril Sdn Bhd manufactures one standard product and currently is suffering from temporary depression in the market.
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Question:
Azril Sdn Bhd manufactures one standard product and currently is suffering from temporary depression in the market. Currently it is operating at a normal level of activity of 70% which represents an out of 6,300 units. The Sales Director believes that with a realistic forecast for the next budget period, sales would be at the 50% level of activity.
Level of activity | |||
60% | 70% | 80% | |
RM | RM | RM | |
Direct Material | 37,800 | 44,100 | 50400 |
Direct Wages | 16,200 | 18,900 | 21,600 |
Production overhead | 37,600 | 41,200 | 44,800 |
Administration overhead | 31,500 | 31,500 | 31,500 |
Selling and distribution overhead | 42,500 | 44,100 | 45,900 |
Total cost | 165,400 | 179,800 | 194,200 |
Profit is at 20% of selling price.
Required:
- To prepare a flexible budget based on the level of activity of 50% which clearly show the profit which would be expected (Use the High and Low Method to separate the variable and fixed cost element).
(15 marks)
- Discuss the advantages of preparing budget for an organization. You are required to discuss five important points of budget preparation.
Related Book For
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
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