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S Ltd. is producing a component at the following cost: Nature of Cost Rs per Unit Cost of Raw Material Consumed 13.50 Labour Cost
S Ltd. is producing a component at the following cost: Nature of Cost Rs per Unit Cost of Raw Material Consumed 13.50 Labour Cost 5.50 Direct Expenses 3.20 Semi Variable Overheads - as a % of Direct Cost 21.0% Semi Variable Overheads - Variable component 50.0% Semi Variable Overhead - Fixed component 50.0% Fixed Overheads 9.50 Sales and Distribution Overheads - Total Cost 38,000 Other information provided is as under: Qty Production & Sold - Nos Installed Capacity - Nos 9,000 12,500 42.00 Sale Price - Rs per Unit The company wants to expand its sales to fully utilize its installed capacity. In order to do so the following is planned: (A) Reduction of 11% on Selling Price (B) Increase in labor cost by 5%, reduction in material cost by 4%. From the above information please advise whether the company should continue with its present volumes or go in for full capacity utilization.
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