Discussion
The budgeted per unit cost data of a toy manufacturing company is :
| Material | ₹ 18 |
| Labour | ₹ 09 |
| Variable overheads | ₹ 08 |
| Selling price | ₹ 50 |
Budgeted production and sales is 1,50,000 units. Fixed overhead incurred is ₹ 4,00,000.
The total profit, if price is decreased by 25% and volume of sales increase by 30%, is :
Answer: A
The new total profit is ₹ 87,500.
Variable cost per unit stays at 18 + 9 + 8 = ₹ 35. The new price is 75 percent of ₹ 50, and the new volume is 130 percent of 1,50,000 units:
\[ \begin{aligned} \text{Price} &= 50 \times 0.75 = 37.50 \\ \text{Units} &= 150000 \times 1.30 = 195000 \\ \text{Contribution/unit} &= 37.50 - 35 = 2.50 \end{aligned} \]
\[ \begin{aligned} \text{Contribution} &= 195000 \times 2.50 = 487500 \\ \text{Profit} &= 487500 - 400000 = 87500 \end{aligned} \]
The fixed overhead of ₹ 4,00,000 does not change with volume. The other figures do not follow from the data: the price cut squeezes the unit contribution from ₹ 15 to ₹ 2.50, and the extra 30 percent volume only partly makes up for it, so profit falls from ₹ 18,50,000 to ₹ 87,500.
Post your comment
Please log in or register to post a comment.
Examination Categories
- SSC Exams
- Banking Exams
- Teaching Exams
- Civil Services Exams
- Railways Exams
- Engineering Recruitment Exams
- Defence Exams
- State Government Exams
- Police Exams
- Insurance Exams
- Nursing Exams
- Other Government Exams
- NRA CET
- PG Entrance Exams
- Campus Placement
- MBA Entrance Exams
- CUET and UG Entrance
- Judiciary Exams
- Regulatory Body Exams
- Software Development