Daily Answer Writing Practice for Commerce Optional UPSC (Mains)- Day 61

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Topic – Budgetary Control

#Q.1) Discuss Zero Base Budgeting as a toll of planning and controlling. 10 Marks


#Q.2)   Calculate efficiency and activity ratio from the following data:

Capacity ratio = 75%
Budgeted output = 6,000 units
Actual output = 5,000 units
Standard Time per unit = 4 hours

-20 Marks

AK Limited produces and sells a single product. Sales budget for calendar year 2013 by a quarters is as under:

Quarters I II III IV
No. of units to be sold 18,000 22,000 25,000 27,000

The year is expected to open with an inventory of 6,000 units of finished products and close with inventory of 8,000 units. Production is customarily scheduled to provide for 70% of the current quarter’s sales demand plus 30% of the following quarter demand. The budgeted selling price per unit is Rs.40. The standard cost details for one unit of the product are as follows:

Variable Cost Rs. 34.50 per unit

Fixed Overheads 2 hours 30 minutes @ Rs. 2 per hour based on a budgeted production volume of 1,10,000 direct labour hours for the year. Fixed overheads are evenly distributed throughout the year.

You are required to:

1. Prepare Quarterly Production Budget for the year.

2.In which quarter of the year, company expected to achieve break-even point-30 Marks