23 40 Question 5(a): ABC - OH Analysis, BEQ with Step Fixed Costs 12 Marks A Company can make any or both of products A and B in a production period not exceeding a total of 10,000 units due to non- availability of the required Material and Labour. Until now, the Company had been taking decisions on the Product Mix, based on the following Marginal Cost Analysis. ARI) BRI) Selling Price 100 120 Variable Cost 60 70 Contribution 50 Total Fixed Costs 3,00,000 Since the decision based on the above approach did not yield the required results, the Fixed Costs were analyzed as follows for 10,000 units of only A or 10,000 units of only B. Item of Cost Details for A A (Amt) B (Amt) Details for B Set up Cost 10 Production Runs 40,000 75,000 10 Production Runs Distribution Cost 120/box 60,000 25,000 200 per box Step Fixed Cost * 4,000 per 2,000 units 20,000 50,000 35,000 per 1,000 Units Total 1,20,000 1,50,000 30,000 can be taken as the unanalyzed Fixed Cost, and unavoidable whether A or Bor both are produced. The following Cost Reduction measures were taken by the Product Managers of A and B: Increase in number of units per run to 2,000 units 1,250 units Increase in the number of units per box distributed to 30 units 125 units Further, the Management ensured availability of Raw Material and Labour to support a production of 15,000 units of either A or Bor both together. There was no change to the Step Costs or Contribution However, the total unanalyzed Fixed Cost increased to ? 32,000. 1. Based on the principles of Activity Based Costing, prepare a Statement showing the Contribution and item-wise analyzed Overheads for each product, arrive at the Profitability of A and B and then the Final Profits if 15,000 units of only A or 15,000 units of only B are manufactured. 2. Find the minimum Break-Even Point in units if only product Ais manufactured after the Cost Reduction A B