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18 (Accepting an Order-Incremental/Opportunity cost approach) Although the Ajoy Company has the capacity to produce 16,000 units per month, current plants call for monthly production
18 (Accepting an Order-Incremental/Opportunity cost approach) Although the Ajoy Company has the capacity to produce 16,000 units per month, current plants call for monthly production and sales of only 10,000 units Rs. 15 each. Costs per unit are as follows: Direct materials Rs. 5.00 Direct labour 3.00 Variable factory overhead 0.75 Fixed factory overhead 1.50 Variable selling expense 0.25 Fixed administrative expense 1.00 Rs. 11.50 (i) Should the Company accept a special order for 4,000 units at Rs. 10 per unit? (ii) What is the maximum price the Company should be wiling to pay to an outside supplier who is interested in manufacturing this product? (iii) What would be the effect on the monthly contribution margin if the sales price was reduced to Rs. 14 resulting in a 10% increase in sales volume
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