Question
A company with its Head Office in Mumbai has two factors situated at station A and B. The data relating to the two factories are
A company with its Head Office in Mumbai has two factors situated at station A and B. The data relating to the two factories are as under:
Factories | A | B |
Contribution margin ratio | 40% | 50% |
Traceable fixed costs | 12,50,000 | 10,50,000 |
Sales | 36,25,000 | 19,00,000 |
The Head Office expenses amount to Rs.2,00,000
Required:
- Analyse the data and state which of the factories should be closed down.
- If the factory which you have recommended for closure desires to continue operations, what increase in sales target is necessary to justify continuance.
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Fundamental Accounting Principles Volume II
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