Problem 13.32 (Contribution approach to pricing-ROCE). Look Ahead Ltd. wants to fix proper selling prices for their products 'A' and 'B' which they ar newly introducing in the market. Both these products will be manufactured in Department D which is considered as a Profit Centre. The estimated data are as under: B Annual Production (unit) 1,00,000 2,00,000 Rs. Rs. Direct Materials per unit 15.00 14.00 Direct Labour per unit (Direct Labour Hour Rate = Rs. 3) 9.00 6.00 The proportion of overheads other than interest, chargeable to the two products are as under: Factory overheads (50% fixed) 100% of direct wages, Administration overheads (100% fixed) 10% of factory costs. Selling and distribution overheads (50% variable) Rs. 3 and Rs. 4 respectively per unit of products A and B. The fixed capital investment in the Department is Rs. 50 lakhs. The working capital requirement is equivalent to 6 months stock of cost of sales of both the product. For this project a term loan amounting to Rs 40 lakhs has been obtained from Financial Institutions on a interest rate of 14% annum. 50% of the working capital needs are met by bank borrowing carrying interest at 18% per annum. The Department is expected to give a return of 20% on capital employed. You are required to: (a) Fix the selling price of products A and B such that the contribution per direct labour hour is the same for both the products. (b) Prepare a statement showing in detail the overall profit that would be made by the Department