Question
XYZ Ltd. Is currently working at 50% capacity and produces 10,000 units. At 60% capacity raw material cost increased by 2% and selling price falls by 2 percent. At 8% capacity raw material cost increased by 5% and selling price falls by 5%. At 50% capacity the product costs Rs. 180 per unit and is sold at Rs. 200 per unit. The unit cost of Rs. 180 comprises the following.
| Particular | Rs. |
| Material | 100 |
| Wages | 30 |
| Factory overheads | 30 (40% fixed) |
| Administrative Overheads | 20 (50% fixed) |
Prepare a marginal cost statement showing the estimated profit of the business when it is operating at 60% and 80% of capacity.
Answer :
Word Count : 656
To prepare the marginal cost statement and calculate the estimated profit for XYZ Ltd. at 60% and 80% capacity, we need to calculate the variable cost per unit and then determine the revenue and total cost at each level of capacity.
Let's start with the calculation:
- Variable cost per unit: Variable cost per unit = Material + Wages + Variable Factory overheads + Variable Administrative Overheads
At 50% capacity: Variable cost per unit = Rs. 100 + Rs. 30 + 60% of Rs. 30 + 50% of Rs. 20 Variable cost per unit = Rs. 100 + Rs. 30 + Rs. 18 + Rs. 10 Variable cost per unit = Rs. 158
-
Revenue per unit at 50% capacity: Selling price per unit = Rs. 200
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