A toy-manufacturing company is at present operating at 80% capacity level, the production being 1,500 units pa. The following relevant fi gures are obtained from the company’s budgets at different capacity utilization levels:

The management expects a profi t margin of 10%. You are required to compare the differential cost of producing additional 375 units by increasing the capacity utilization level to 100%.

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Sales Variable overheads Semi-variable overhead Fixed overhead Output (in units) Capacity 80% Utilization Level 100% Rs. 2,00,000 Rs. 2,50,000 20,000 25,000 10,500 11,100 40,000 47,000 1,500 1,875