A Ltd is engaged in the business of manufacturing and selling gents wallets. The cost incurred on the production per unit is as under:
Particulars of Expenses	Value / INR
Direct Material	450
Direct Labor	145
Direct Expenses = 30% of Material Cost
Total Direct Expenses	???
The company incurs an overhead cost of Rs 19,60,000 every month. The company sells its product at a price of Rs 1,030 per unit but is unable to sell more than 7,700 pieces in a month due to production capacity constraints.
B Ltd is a company in similar business and has approached A Ltd offering to sell gents wallets at Rs 675 per piece upto 12,000 numbers on which A Ltd will have to incur a cost of Rs 50 per piece to have its brand printed. A Ltd will be able to sell the phones purchased from B Ltd at a price of Rs 750 only without increasing its overheads.
Answer the following:
a. Calculate the existing profitability of A Ltd and its present Break Even Sales number.
b. How many mobile phones will A Ltd have to sell to earn a profit of Rs 5,00,000
c. Is it possible for A Ltd to break even or earn profits under the present situation?
d. Should A Ltd accept the offer of B Ltd? Give justification for your answer.
e. In case the OHs increase by Rs 275,000 should A Ltd still buy from B Ltd?