Cost Accounting
This query is : Resolved
22 December 2009
Can any one please help me to solve this:?
Q ltd is currently operating at 80% capacity level. The production under normal capacity level is Rs.1,50,000 units. The variable cost/unit is Rs.14 and the total fixed costs are Rs.8,00,000. If the company wants to earn a profit of Rs.4,00,000, then the price of the product/unit should be?
Q ltd is currently operating at 80% capacity level. The production under normal capacity level is Rs.1,50,000 units. The variable cost/unit is Rs.14 and the total fixed costs are Rs.8,00,000. If the company wants to earn a profit of Rs.4,00,000, then the price of the product/unit should be?
22 December 2009
Total Contribution required = Rs.400000+ Rs.800000 is Rs.1200000
so contribution per unit = 1200000/1500000 = Rs.8
So variable cost Rs.14 per unit + Contribution Rs.8 Perunit
Sales price for Earing Profit Rs.400000/- is (14+8) =22
So Answer is Rs.22 per unit sales price
so contribution per unit = 1200000/1500000 = Rs.8
So variable cost Rs.14 per unit + Contribution Rs.8 Perunit
Sales price for Earing Profit Rs.400000/- is (14+8) =22
So Answer is Rs.22 per unit sales price
23 December 2009
perfect. agree with expert
23 December 2009
Thank you sir. But they have given options like 37.50, 24.00, 38.25, and 34.50. What is it? Can there be any other method Sir?
24 December 2009
If the company is working at 80% of normal capacity which is 1,50,000 units, this means company is producing 150000x.8=120000 units. So the contribution required per unit is 1200000/120000=Rs.10/unit. So the selling price should be v.c.+Cont. i.e. Rs.14+10=24.
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