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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:

  1. Analyse the data and state which of the factories should be closed down.
  2. 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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