Lesson eLearning

A small bakery expects to sell 12,000 loaves of bread in the next month. The selling price per loaf is Rs.45, the variable cost per loaf is Rs.20, and the fixed manufacturing overhead is Rs.120,000. Prepare the production budget in rupees and compute the expected profit.

medium 3 marks Class 12 · Business Studies · Planning
Answer
Production budget: Rs.360,000; Expected profit: Rs.180,000

The correct answer is Production budget: Rs.360,000; Expected profit: Rs.180,000 — Determine profit: Rs.540,000 – Rs.360,000 = Rs.180,000.

Step-by-step solution

  1. Calculate variable cost: 12,000 loaves × Rs.20 = Rs.240,000.
  2. Add fixed overhead: Rs.240,000 + Rs.120,000 = Rs.360,000. This is the production budget.
  3. Compute total revenue: 12,000 loaves × Rs.45 = Rs.540,000.
  4. Determine profit: Rs.540,000 – Rs.360,000 = Rs.180,000.
Common mistake: Omitting fixed overhead when computing total cost

Concept tested: Production budget and profit calculation

Published · How this solution was prepared and checked

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