Question
A firm prepares a flexible budget formula based on
activity: Sales = ₹20/unit, variable cost = ₹12/unit, fixed cost = ₹1,20,000. If actual production falls to 25,000 units from the planned 30,000, compute the flexible budget profit at 25,000 units.Solution
• Sales revenue = 25,000×20 = ₹5,00,000; Var cost = 25,000×12 = ₹3,00,000; Fixed = ₹1,20,000. • Profit = 5L – 3L – 1.2L = ₹80,000.
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