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Illustration 4: A company is considering expansion. Fixed costs amount to rs.4,20,000 and are expected to increase by rs.1,25,000 when plant expansion is completed. The
Illustration 4: A company is considering expansion. Fixed costs amount to rs.4,20,000 and are expected to increase by rs.1,25,000 when plant expansion is completed. The present plant capacity is 80,000 units a year. Capacity will increase by 50 percent with the expansion. Variable costs are currently rs.6.80 per unit and are expected to go down by re.0.40 per unit with the expansion. The current selling price is rs.16 per unit and is expected to remain the same under either alternative. What are the break- even points under either alternatives? Which alternative is better and why? illustration 5: A factory engaged in manufacturing plastic buckets is working at 40% capacity and produces 10,000 buckets per annum: Rs. Material 10 Labour cost 3 Overheads 5 (60% fixed) The selling price is rs.20 per bucket. If it is decided to work the factory at 50% capacity, the selling price falls by 3%. At 90% capacity the selling price falls by 5%, accompanied by a similar fall in the prices of material. You are required to calculate the profit at 50% and 90% capacities and also the break-even points for the same capacity productions
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