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Fixed cost being Rs. 25,000, break-even sales of AB Lid. is sales of 500 units of each of the three products X, Y and Z.

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Fixed cost being Rs. 25,000, break-even sales of AB Lid. is sales of 500 units of each of the three products X, Y and Z. Break-even sales in terms of value is (500 x 28 + 500 x 60 +500 x 125), i.e. Rs. 1,06,500. (d) Sales value to earn a post-tax return of 10% on capital employed Required return 10% of Rs. 1,00,000 i.e. Rs. 10,000 Required operating profit = Required return _Rs.10,000 - Rs.10,000 Rs.20,000 (1 - tax rate (1 -0.50) 0.50 Committed sales will earn contribution enough to meet fixed costs. Therefore, to earn an operating profit of Rs. 20,000 additional units of Y is to be sold to eam a contribution of Rs. 20,000. Thus, the total number of units of Y to be sold is (500+ Rs.20,000/15) i.e. 1,833.33 or 1,834 units. Thus, total sale value is 500 x Rs.28 = Rs. 14,000 X: Y: 1,834 x Rs. 60 = Rs. 1,10,040 Z: 500 x Rs. 125 = Rs. 62,500 Total = Rs. 1, 86,540 t35 Example 6.16: The costs per unit of the three products A, Band C of a company are given below: 6 4 40 Product A Product B Product C Direct material Rs. 20 Rs.16 Rs. 18 Direct labour 12 14 12 Variable expenses 8 10 Fixed expenses 6 6 46 46 Profit 18 14 12 Selling price 64 60 52 No. of units produced 10,000 5,000 Production arrangements are such that it one product is given up the production of the other can be raised by 50%. The directors propose that should be given up because the contribution from the product is the lowest. Present suitable analysis of the data indicating whether the proposal should be accepted. 8,000

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