Illustration 7 The Managing Director of a small manufacturing concern consults you as to the minimum price at which he can sell the out. put of one of the departments of ihe compan;' which is intended for mass production in future. The company's records show the following particulars for the departmen foi the past year :- Production and Sales 100 Units Rs. Materials 13,000 Direct Labour 7,000 Direct charges (variables 1,000 Works overheads 7,000 Office overheads 2,800 Selling overheads 3,200 Profit 5,000 39,000 You ascertain that 40% of the works overheads fluctuate directly with production and 70% of the selling overheads fluctuate with sales. It is anticipated that the department would produce 500 units per annum and that direct labour charges per unit will be reduced by 20% wiile fixed works overheads charges will increase by Rs. 3000. Oifice overheads and fixed selling overheads charges are expected to show an increase of 25% but otherwise no changes are anticipated