Q-2 MRG Beverages Ltd. is currently operating at 85% of its capacity. In the past 2 years, the level of operations were 65% and 75% respectively. Presently, the production is 85,000 water bottles. The company is planning for 95% capacity level during 2020-21. The cost details are as follows:
Particulars 65% 75% 85% 95%
Amount in Rs Direct Materials 3,00,000 3,00,000 3,00,000 3,00,000
Direct Labour 6,50,000 7,50,000 4,30,000 4,60,000
Factory Overheads 4,10,000 4,50,000 5,00,000 5,00,000
Selling Overheads 4,20,000 4,60,000 2,60,000 2,60,000
Administrative Overheads 2,60,000 2,60,000 2,60,000 2,60,000
Total Overheads 29,40,000 33,00,000 36,60,000 36,60,000
Profit is estimated at 30% on sales.
The following increase in costs are expected during the year:
In percentage 9 6
Direct Materials 9 9
Direct Labour 6 6
Variable Factory Overheads 11 11
Variable Selling Overheads 16 16
Fixed Factory Overheads 11 11
Fixed Selling Overheads 16 16
Administrative Overheads 11 11
Prepare a flexible budget for the period 2020-21 at 95% level of capacity. Also, ascertain profit and contribution. [10 Marks]