MARGINAL

COSTING NUMERICAL

Q1. Total Fixed Cost Rs. 40,000, Variable Cost per unit Rs. 2, Total Sales Rs. 200,000. Variable Cost as percent of Sales 20%.
Find out the following –
a) P/V Ratio
b) BEP (Sales)
c) Profit when Sales are Rs. 120,000
d) Sales required for earning a profit of Rs. 60,000

Q2. Total Invoice Value Rs. 1,00,000, Total Marginal Cost Rs. 60,000, Total Non‐Variable Cost Rs. 30,000.
Find out the following –
a) P/V Ratio
b) BEP (Sales)
c)Profit when Sales are Rs. 140,000
d) Sales required for earning a profit of Rs. 15,000
e) Margin of Safety.

Q3. Sales (Rs.) at 100 % capacity Rs. 12,00,000, Total Rigid Cost Rs. 1,00,000, Chargeable Expenses 2 % of Sales, Variable Mfg. Overheads
10 % of Sales, Selling & Distr. Cost 8 % of Sales, Direct Material 35 % of Sales, Direct Labour 20 % of Sales.
Find out the following –
a) P/V Ratio
b) Sales at Break‐Even Point
c) Profit at 100% capacity
d) Profit when Sales are at 80% capacity
e) Profit when Prime Cost increases by 5 %

Q4. A company manufactures two products ‐ Gold & Silver. Total prime cost of production Rs. 38,400. Selling price per unit ‐ Gold Rs. 100
& Silver Rs. 50. The Prime Cost per unit ‐ Gold Rs. 30 Silver Rs. 12. During 2009‐10, 800 kgs of Gold and 1200 kgs of Silver were
produced and sold. Total Sales Value Rs. 140,000. Total Advertisement Expenses Rs.70,000, Total Warehouse Rent Rs.20,000.
According to company sources, Advertisement expense is a fixed cost. Advertisement cost to be divided on the basis of sales value
achieved. Warehouse Rent was paid on the based on quantity produced. Prepare a statement of cost as per marginal costing
technique. Find the following –
a) P/V ratio of each product
b) Profit of each product.

Q5. A factory produces 300 units of a product per month. The selling price per unit is Rs. 120. The variable cost is Rs. 80 per unit. Fixed
overheads per month are Rs. 8000. Compute the following ‐
a) Estimated profit in a month when 240 units are produced
b) BEP (sales quantity)
c) Sales amount required to earn a profit of Rs. 7,000 per month.

Q6. A company has annual fixed cost of Rs. 14,00,000. In the year 2007, total sales amounted to Rs. 60,00,000 as compared to Rs.
45,00,000 in 2006. The profit in 2007 was Rs. 420,000 more than profit of year 2006. Based on data given answer the following:
a) At what level of sales, the company would break even?
b) Determine the profit / loss on a forecasted sales of Rs. 80,00,000
c)If the selling price is reduced by 10% in the year 2008 and company expects the same profit as 2007, what should be the required
sales value?

Q7. The turnover and profit during two weeks is given below ‐
Week 1 ‐ Sales Rs. 20 lakh and Profit Rs. 2 lakh and Week 2 ‐ Sales Rs. 30 lakh and Profit Rs. 4 lakh
Calculate – (a) P/V ratio, (b) Sales required to earn a profit of Rs. 5 lakh, (c) Profit when sales are Rs. 10 lakh.

Q8. Compute the BEP (Sales) and BEP (units), on the basis of given information ‐
Direct Material per unit Rs. 8.00, Direct Labour per unit Rs. 5.00, Fixed Overheads Rs. 24,000, Selling Price per unit Rs. 25.00 Trade
Discount – 4%, Variable overheads are 60 % of labour cost. If sales are 15% and 20% above the BEP level, determine the net profits
at these levels.

 Marginal Costing
Q9. Following data is obtained from the records of an industrial unit ‐
Sales of 4000 units @ Rs. 25 each (Rs.) 100,000
Material Consumed (Rs.) 40,000
Variable Overheads (Rs.) 10,000
Labour Charges (Rs.) 20,000
Fixed Overheads (Rs.) 18,000
Total Cost (Rs.) 88,000
Net Profit (Rs.) 12,000
Compute the following –
a) Number of units to be sold, so that the company neither makes a profit or a loss?
b) Sales units and sales amount required to earn a profit of 20% on sales.
c) If the selling price is reduced by 20 %, then how many extra units should be sold to maintain the same profit?
d) What should be selling price to bring down its BEP to 500 units?

Q10. Following information is provided for a company –
Total Sales (Rs.) 400,000
Direct Material (Rs.) 20,000
Direct Wages (Rs.) 60,000
Variable Overheads (Rs.) 20,000
Total Fixed Cost (Rs.) 100,000
Find P/V ratio and BEP (Sales) in each of the following cases ‐
a) Current scenario
b) 10 % increase in prime cost
c) 5 % increase in sales and 10 % increase total variable cost
d) 2 % fall in sales and 5 % rise in material cost.

Q11. Swojas India Ltd. uses raw material ABC in its production process. The company produces 10,000 units of ABC at a cost of Rs. 40 per
unit (incl. fixed cost). The total fixed costs are Rs. 150,000. Raw material ABC is available in the market at a price of Rs. 30 per unit.
Advice the company whether to continue manufacturing ABC or to buy from market?

Q12. A company sells its product at selling price of Rs. 15 per unit. In 1999, it sells 8000 units and makes a loss of Rs. 5 per unit. In 2000, it
sells 20,000 units and makes a profit of Rs. 4 per unit.
a) Compute BEP (units) and BEP (Sales)
b) What quantity the company should sell to make a profit of Rs. 200,000?
c) If the company produces and sells 30,000 units, what will be its profits?

Q13. The following data is available for the two products of Bachpan Ltd.
Particulars ABHI ASH
Selling price per unit (Rs.) 100.00 110.00
Material cost per unit (Rs.) 24.00 14.00
Direct labour per unit (Rs.) 2.00 3.00
Variable Overheads (Rs.) 4.00 6.00
(Rs. 2 per hour)
Standard labour time to produce a unit 2 hours 3 hours

Which product should be manufactured in the factory if labour hours are in shortage? Maximum hours 1000 per month, the
production capacity of ABHI is 350 units & ASH 200 units. Compute total profit of the company if total fixed cost Rs. 28,000.

Q14. The following data is available from the records of Atlas Ltd.
Particulars Product CEE Product DEE
Selling price per unit (Rs.) Rs. 100 Rs. 200
Material cost per kg (Rs.) Rs. 10 Rs. 10
Material required per unit (Kg.) 2 kg 5 kg
Wages cost per hour (Rs.) Rs. 3 Rs. 3
Hours needed per unit 10 hours 20 hours
Variable Overheads (Rs.) Rs. 10 Rs. 20
Actual Prod. & Sale quantity 1200 units 800 units
Maximum production capacity 3000 units 3000 units

 Marginal Costing

Compute the following –

a) Profit for each product, total fixed cost Rs. 50,000 distributed on sale quantity basis
b) Which product to be given preference in following cases. Compute total profit.
i) if raw material is in short supply (10000 kg available)
ii) if labour hours are in short supply (40000 hours available)
iii) if sales quantity is the key factor

Q15. A company makes an average net profit of Rs. 2.50 per unit on a selling price of Rs. 14.30 by producing and selling 60,000 pieces @
60% of installed capacity. Cost data is –
Direct Material per unit (Rs.) 3.50
Direct Wages per unit (Rs.) 1.25
Factory Overheads per unit (Rs.) 6.25
(50 % fixed)
Selling & Distribution Overheads 0.80
(25 % variable)
Fixed costs at present level remain constant at all levels. During the next year, the company expects the total fixed cost to increase by
10 % while the rates of direct material and direct labour will increases by 6 % and 8 % respectively. But there is no option of
increasing the selling price. Under this situation it obtains an offer for an order equal to 20% of its total capacity. The concerned
customer is special customer. What minimum selling price can be quoted to make an overall profit of Rs. 167,300?

Q16. The plant capacity of a manufacturing company is 400,000 units p.a., current utilization is 40%. Selling Price p.u. Rs.50.00, Material
Cost per unit Rs. 20.00, Variable Mfg. cost Rs. 15.00, Total Fixed Cost Rs. 27 lakhs. In order to improve capacity utilization the
following proposals are being considered:
a) Reduce selling price by 10% and
b) Spend additionally Rs. 3 lakhs on sales promotion
How many units should be produced and sold in order to earn a profit of Rs. 5 lakh.

Q17. A company manufactures and sells a single product. The following information is available:
Material cost per unit Rs. 8.00, conversion cost per unit Rs. 6.00, dealer's margin (10 % of SP) Rs. 2.00, SP per unit Rs. 20.00. Total
fixed cost Rs. 250,000, current sales quantity 80,000 units, Current capacity utilization 60%
There is acute competition and extra efforts are necessary to sell the product. Suggestions are made for increasing sales:
(i) By reducing sales price by 5%, or
(ii) By increasing dealers margin by 25% over the existing rate.
Which of the two suggestions you would recommend if the company desires to maintain the present profit? Give reasons.

Q18. A company has earned a contribution of Rs. 200,000 on Sales of Rs. 800,000. The Net Profit is Rs. 150,000.
a) Find Margin of Safety
b) Fixed Cost
c) BEP Sales

Q19. A company manufactures and sell three products A, B and C. Product A is making a loss and hence the company is thinking to
discontinue the production of product A. Advise the company about their point of view. Fixed Costs are distributed in ratio of sales.
Particulars A B C Total
Sales Value (Rs.) 1,00,000 2,00,000 3,00,000 6,00,000
Material Cost (Rs.) 45,000 90,000 1,25,000 2,60,000
Direct Labour Cost (Rs.) 30,000 45,000 65,000 1,40,000
Variable Overheads (Rs.) 15,000 20,000 40,000 75,000
Fixed Cost (Rs.) 15,000 30,000 45,000 90,000
Total Cost (Rs.) 1,05,000 1,85,000 2,75,000 5,65,000
Profit (Rs.) (5,000) 15,000 25,000 35,000

Q20. The cost details of a product manufacturing are given below –
Material Cost per unit Rs. 12.00, Labour cost per unit Rs. 9.00, Variable expenses Rs. 6.00, Fixed expenses per unit Rs. 18.00. Total
Cost per unit Rs. 45.00, Selling price per unit Rs. 51.00.
Current capacity utilization is 80% and installed capacity is 100,000 units.
The company has received an export order to supply 20,000 units at selling price of Rs. 30 per unit.
a) Advice the company, whether to accept the order or not?
b) What is the lowest price at which the order can be accepted?
c) Whether your decision would be same, if the order was domestic?

 Marginal Costing
Q21. A manufacturing company has a P/V ratio of 40 %. The company wants to increase its SP per unit by 10 % whereas the company's
variable cost has increased by 5 %. The total fixed costs have gone up from Rs. 200,000 to Rs. 258,500.
Compute original BEP (Sales) and revised BEP (Sales) after above changes.

Q22. Following information is available for two products X and Y –

Particulars X Y
Selling price per unit (Rs.) Rs. 42 Rs. 33
Material cost per kg (Rs.) Rs. 3 Rs. 3
Material required per unit (Kg.) 5 kg 3 kg
Wages cost per hour (Rs.) Rs. 0.50 Rs. 1.00
Hours needed per unit 18 hours 9 hours
Variable Overheads per hour (Rs.) Rs. 0.25 Rs. 0.50

Advise which product will be more profitable if a) Labour hours are in shortage, b) Raw material is key factor, c) Total production
quantity limited.

Q23. A company manufactures the input material required for the production of its final product.
The manufacturing costs are given below ‐
Material cost per unit Rs. 2.75
Labour cost per unit Rs. 1.75
Variable overheads Rs. 0.50
Depreciation & Fixed Cost Rs. 1.25
Total Cost per unit Rs. 6.25
The input material is available in the market for Rs. 5.25 per unit.
a) Whether the material should be purchased from the market?
b) What will be your decision if the material is costing Rs. 4.90 in the market?

Q24. A company is planning to enter in the business of dairy products. 200 gallons of milk is available daily for producing jointly or
individually ‐ butter, cheese & paneer. The policy of company is to produce and sell all three kinds of products as well as the
maximum and minimum use of milk per product. The output per gallon for different products and their selling prices are given:

Product Max gallon Min gallon
Butter 160 120
Cheese 50 30
Paneer 30 10

Particulars Butter Cheese Paneer
Output per gallon (kg) 2,000 500 100
Selling price per Kg. Rs. 20 Rs. 40 Rs. 250
Labour charges per kg Rs. 8 Rs. 10 Rs. 120
Packing Material per kg Rs. 2 Rs. 2 Rs. 10
Variable overheads per kg Rs. 4 Rs. 1 Rs. 20
Total Fixed Cost Rs. 18,00,000

Calculate the priority of production, the most profitable product mix and the maximum profit that can be achieved.

Q25. Given below is the budget for 2012 year –
Product Sales VC / Sales
(Rs. in lakhs)
A 5.00 60%
B 4.00 50%
C 8.00 65%
D 3.00 80%
E 6.00 75%
26.00

Total Fixed Costs are Rs. 9 lakhs.
a) Compute the expected profit / loss for year 2012.
b) If there is a loss, what should be the percentage change in sales value of each product to eliminate the expected loss? Only Sales of
one product can be increased at a time.

 Marginal Costing
Q26. ABBA Ltd. has two factories producing the same product. SP = Rs. 150 p.u. Compute BEP for the two factories and for the company as
a whole – based on Constant Sales mix and Variable Sales Mix. Following details are given –

Particulars Factory A Factory B Total

Production (units) 10,000 15,000 25,000
Variable cost per unit Rs. 100 Rs. 120 ‐
Fixed Cost Total Rs. 3,00,000 2,10,000 5,10,000

Q27. Compute the combined P/V ratio and Combined BEP, based on Constant Sales mix & Variable Sales mix. The total Fixed Costs of the
company are Rs. 300,000. Following data is available –

Particulars Factory X Factory Y Factory Z
Production (units) 24,000 100,000 50,000

Contribution per unit Rs. 6.00 Rs. 2.50 Rs. 4.00
Selling Price per unit Rs. 12.50 Rs. 7.00 Rs. 10.00

Q28. There are two plants producing the same product. The company has decided to merge them. Compute the following –
Particulars Plant I Plant II
Capacity utilization 100% 60%
Total Sales (Rs. lakhs) 60.00 24.00
Total Variable Cost (Rs. lakhs) 44.00 18.00
Total Fixed Cost (Rs. lakhs) 8.00 4.00

a) What should be the capacity of the merged plant, so that there is break‐even?
b) What would be the profits of the merged plant, working at 75 % of merged capacity?

Q29. Selling price per unit Rs. 69.50 and variable cost Rs. 35.50 per unit. Output 54,000 units. Total Fixed Costs Rs. 18.02 lakhs. Presently,
the company is operating at 40% capacity. Required –
a) Find the existing profit
b) If the production is doubled what will be additional profit if –
 selling price per unit is reduced by 10 % for 20% rise in capacity, and
 selling price per unit is reduced by 15 % for next 20% rise in capacity.

Q30. A company produces and sells 24,000 small tools every year. The SP Rs. 800/unit, VC Rs. 600/unit, Total Fixed Costs comprise of
Salaries Rs. 24,00,000 & Office and Sales distribution Rs. 16,00,000.
a) Compute BEP (qty & Sales) and margin of safety at the current level of operations
b) If the output is increased by 25%, what will be the profit?
c) In next year, SP to rise by 15% and Salaries to increase by Rs. 10,00,000. What will be the new BEP – units & Sales?

Q31. A single product company sells its product at Rs. 60 per unit. In 2006, the company operated at a margin of safety of 40%. The fixed
costs amounted to Rs. 360,000 and the variable cost ratio to sales was 80%. In 2007, it is estimated that the variable cost will go up
by 10% and the fixed cost will increase by 5%. For the next year –
(i) Find the selling price required to be fixed in 2007 to earn the same P/V ratio as in 2006.
(ii) Assuming the same selling price of Rs. 60 per unit in 2007, find the extra units required to be produced and sold to earn the
same profit as in 2006.

Q32. ABCL Ltd. maintains a margin of safety of 37.5% with contribution to sales ratio of 40%. Its fixed costs Rs. 500,000. Calculate – Total
Current Sales, BEP (Sales), Total Variable Cost, Current Profits, Margin of Safety if sales volume is increased by 7.50 %.

Q33. A factory engaged in manufacturing plastic buckets is working to 40% capacity and produces 10,000 buckets per annum. The
present cost break up for one bucket is as follows – Material Rs. 10, Labour Rs. 3, Overheads Rs. 5 (60% fixed at current level). The
selling price is Rs. 20 per bucket.
(i) If it is decided to work the factory at 50% capacity, the selling price falls by 3%.
(ii) At 90% capacity, the selling price falls by 5% accompanied by a similar fall in the price of material.
Calculate the profit at 50% and 90% capacities and show BEP for same capacity production.

Q34. Following particulars are extracted from the records of a company. Direct labour per hour is Rs. 5. Comment on profitability, when ‐
a] total sales potential in units is limited
b] total sales potential in value is limited
c] raw material is in short supply
d] production capacity (in terms of machine hours) is limited.
Raw material availability is only 10,000 kg and maximum potential of each product is 3500 units. Find out best product mix.

 Marginal Costing
Particulars Product A Product B
Selling price per unit (Rs.) Rs. 100 Rs. 120
Material consumption per unit 2 kg 3 kg
Material Cost per unit Rs. 10 Rs. 15
Direct Labour Cost (Rs.) Rs. 15 Rs. 10
Direct Expenses (Rs.) Rs. 5 Rs. 6
Machine hours used 3 hours 2 hours
Fixed Overheads per unit (Rs.) Rs. 5 Rs. 10
Variable Overheads per unit (Rs.) Rs. 15 Rs. 20

Q35. Black & White Ltd. manufactures 10,000 units at 33.33% capacity utilization. The cost/ unit Rs. 4.00. All the output is sold in the
domestic market at a selling price of Rs. 4.25 per unit. In the next year, the demand is expected to reduce and the current level can be
maintained only if a discount of 12.50% is offered to the domestic customers.
Material cost per unit Rs. 1.50, Wages per unit Rs. 1.10, Variable overheads Rs. 0.60, Total Fixed Costs Rs. 8,000.
The Mktg. Manager has received an export inquiry in the next year to sell 20,000 units of their product at a price of Rs. 3.55 p.u.
Additional packing equipment of Rs. 1,600 would be required. Advice, whether the export market should be explored?

Q36. Following data is obtained from the records of an industrial unit ‐
Sales of 5000 units @ Rs. 25 each Rs. 125,000, Material Consumed Rs. 50,000, Variable Overheads Rs. 15,000, Labour Rs.25,000,
Fixed Overheads Rs. 18,000, Net Profit Rs. 17,000. Compute the following –
a) number of units to be sold, so that the company neither makes a profit or a loss?
b) Sales required earning a profit of 25% on sales.
c) If the selling price is increased by 10 %, then how many units should be sold to maintain the same profit as given above?
d) What should be selling price to bring down its BEP to 1000 units.

Q37. The ratio of variable cost to sales is 70%. The BEP point is at 60 % of max capacity. Fixed Cost Rs. 90,000. Find:
a) Sales at installed capacity
b) Profit at 75 % of capacity sales
c) What should be the Sales to earn a profit of Rs. 45,000?
d) What will be Margin of Safety at 80 % capacity utilization?

Q38. A company has annual fixed cost of Rs. 400,000. In the year 1981, total sales was to Rs. 50,00,000 as compared to Rs. 35,00,000 in
1982. The profit in 1981 was Rs. 200,000 more than profit of year 1982. Based on above information, answer the following ‐
a) At what level of sales, the company would break even?
b) Determine the profit / loss on a forecasted sales of Rs. 60,00,000.
c) If the Selling price is reduced by 10% in the year 1983 and company expects the same profit as 1982, what should be the required
sales value ?

Q39. The margin of safety is Rs. 240,000 (40% of sales) and P/V ratio is 30%. Calculate: (i) Break Even Sales, (ii) Amount of profit on sales
of Rs. 900,000, (iii) Sales for a profit of Rs. 50,000, (iv) Total variable costs

Q40. Vinayak Ltd. is operating at 75% level and sells two products A and B. The cost sheet of the two products is given below –
Particulars A B
Units produced and sold 600 400
Direct Material Rs. 2.00 Rs. 4.00
Direct Labour Rs. 4.00 Rs. 4.00
Factory Overheads (40% fixed) Rs. 5.00 Rs. 3.00
Selling Overheads (60% fixed) Rs. 8.00 Rs. 5.00
Total Cost per unit Rs. 19.00 Rs. 16.00
Selling Price per unit Rs. 23.00 Rs. 19.00

Factory overheads are computed on basis of machine hours, which is the key factor. The machine hour rate is Rs. 2 per hour. The
company receives an offer from Canada for the purchase of product A at a price of Rs. 17.50 per unit. Alternatively, the company has
another offer from the Middle‐East for the purchase of product B at a price of Rs. 15.50 per unit. In both the cases, a special packing
charge of 50 paise per unit has to be borne by the company. The company can accept either of the two export orders and in each case
the company can supply such quantities as may be possible to be produced by utilizing the balance of 25% of its capacity. Prepare –
a) A statement showing the feasibility of two export proposals giving your recommendations.
b) A statement showing overall profitability of the company after incorporating the export proposal recommended by you.

Q41. A company wants to buy a new machine to replace one, which is having frequent breakdown. It received offers for two models, M1 &
M2. Details regarding these two models are given below –

 Marginal Costing
Particulars M1 M2
Installed Capacity (units) 10,000 10,000
Fixed Overheads per year Rs. 2,40,000 Rs. 1,00,000
Estimated Profit at above capacity Rs. 1,60,000 Rs. 1,00,000

The product manufactured using this type of machine, M1 or M2, is sold at Rs. 100 per unit. You are required to determine,
1. Break Even level of quantity and sales for each model.
2. The level of sales at which both the models will earn the same profit.
3. The model suitable for different levels of demand for the product.

Q42. JK Ltd. has installed capacity of 520,000 units p.a. Cost of Production is as follows – Direct Material Rs. 15 per unit, Direct Wages Rs. 9
per unit (or Rs. 250,000 per month whichever high), Fixed Overheads Rs. 960,000 p.a. Variable Overheads Rs. 8/unit. Semi‐variable
Overheads are Rs. 560,000 per year upto 50% capacity and additional 150,000 p.a. for every 25% increase in capacity. The company
worked at 60% capacity for first 3 months of the year 2009 and is expected to work at 90% capacity for the remaining part of the
year. The selling price per unit was Rs. 44 per unit during first three months. What should be the selling price for the remaining part
of the year to earn a total profit of Rs. 15, 62,500 for the whole year?

Q43. Quality Products Ltd. provides the following data for the year 2008 – Raw Material Rs. 20,00,000. Direct Labour Rs. 600,000. Fixed
Prodn Overheads Rs. 700,000, Variable Packing Cost Rs. 400,000. Fixed Admin Overheads Rs. 300,000, SP Rs. 50 per unit, Sales
quantity 100,000 units. The General Manager suggests reducing the selling price by 5% to achieve additional sales volume of 5%.
Intensive manufacturing operations will result in additional fixed cost of Rs. 15,000. Also, additional selling efforts would cost
Rs.100,000 p.a. The Sales Manager wants to increase the SP/unit by 10%. This will reduce sales volume by 10% and hence
Manufacturing and Admin overheads would reduce by Rs. 50,000 and Rs, 100,000 respectively. Which proposal to be accepted?

Q44. A company works at 80% capacity with sales of Rs. 800,000 (SP Rs. 25), material cost Rs. 7.50, labour cost Rs. 6.25. Total semi‐fixed
cost Rs. 180,000 (3.75 p.u. variable) F.C Rs. 90,000 upto 80% capacity and extra Rs. 20,000 beyond this level. Compute –
a) BEP Sales and BEP units and level of activity i.e. capacity utilized
b) No of units to be produced and sold to earn a profit of 8% on sales.
c) Sales value needed for a profit of Rs. 95,000 and level of capacity.
d) What will be selling price to achieve BEP if current sales quantity is reduced to 50% level?

Q45. Novina Industries has received an export order for its only product. The factory capacity is 400,000 units p.a. and export order would
require half of its factory capacity. The factory is presently running at 60% capacity utilization and selling in domestic market at a
price of Rs. 6 per unit. The export price quoted is Rs. 4.50 per unit. The details of cost of production are given below – Direct Matl.
Rs.2.50 p. u and Direct Labour Rs. 1.00 p.u. Direct Expenses Rs. 0.50 p.u, Fixed OH Rs. 1 p.u.
The export order can be accepted or rejected in full. Following alternatives are available to the company:
i. Accept the export order and keep the domestic sales unfulfilled to the extent necessary.
ii. Increase factory capacity by installing new machinery and also working overtime to meet requirement. Fixed overheads
will rise by Rs. 20,000 p.a. and additional cost of overtime Rs. 40,000 p.a.
iii. Outsource the production of additional requirement by supplying direct material and paying for conversion charges of
Rs.1.75 per unit. Additional Supervision cost Rs. 3000 per month.
iv. Reject the export order and continue to domestic supply.
Advice the management of the company, which alternative to select to be most suited to the company.