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Sales Mix:
a. 100 units of A and 200 units of B
b. 150 units of A and 150 units of B
c. 200 units of A and 100 units of B
The above figures are for an output of 50,000 units, the capacity for the firm is 65,000 units. A foreign
customer is desirous of buying 15,000 units at a price of Rs.10 per unit. Advise the manufacturer whether
the order should be accepted. What will be your advice if the order were from a local merchant.
Expansion Ltd manufacturing automobile accessories and parts. The following are the total costs of
processing 1,00,000 units.
Direct material – Rs.5 lacs, Direct labour– Rs.8 lacs, Variable factory overheads – Rs.6, lacs, Fixed factory
overheads – Rs.5 lacs.
A) Should the part be made or bought considering that the present facility when released following a
buying decision would remain idle.
B) In case the released capacity can be rented out to another manufacturer for Rs.1,50,000/- having
good demand. What should be the decision?
Owing to trade difficulties the company is operating at 50% capacity. Selling prices have had to be
lowered to what the directors maintain is an uneconomic level and they are considering whether or not
their single factory should be closed down unitl the trade recession has passed.
A market research consultant has advised that in about twelve months time there is every indication that
sales will increase to about 75% of normal capacity and that the revenue to be produced from sales in the
second year will amount to Rs. 90,000. The present revenue from sales at 50% capacity would amount to
only Rs. 49,500 for a complete year.
If the directors decide to close down the factory for the year, it is estimated that :
Prepare a statement for the directors presenting in such a way as to indicate whether it is desirable
to close the factory.