Question

    ABC Ltd operates at 80% capacity producing 16,000 units.

    The cost per unit is: • Direct Material ₹50 • Direct Labour ₹20 • Variable Overheads ₹10 • Fixed Overheads ₹40 (Total ₹8,00,000) Prepare flexible budget for 90% capacity and compute per unit cost.
    A ₹125.5 Correct Answer Incorrect Answer
    B ₹124.4 Correct Answer Incorrect Answer
    C ₹120.2 Correct Answer Incorrect Answer
    D ₹118.8 Correct Answer Incorrect Answer
    E ₹128.7 Correct Answer Incorrect Answer

    Solution

    Step 1: Current Capacity Details • 80% capacity = 16,000 units • Therefore, 100% capacity = 16,000 ÷ 0.80 = 20,000 units • So, 90% capacity = 20,000 × 0.90 = 18,000 units ________________________________________ ✅ Step 2: Calculate Total Cost at 90% (18,000 units) Variable Costs (change with output): • Direct Material = 18,000 × ₹50 = ₹9,00,000 • Direct Labour = 18,000 × ₹20 = ₹3,60,000 • Variable Overheads = 18,000 × ₹10 = ₹1,80,000 Fixed Costs: • Fixed Overheads = ₹8,00,000 (remains unchanged) Total Cost for 18,000 units = 9,00,000 + 3,60,000 + 1,80,000 + 8,00,000 = 22,40,000 ✅ Step 3: Per Unit Cost at 90% Capacity

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