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Q5): ABC Ltd makes three products and reviewing the protability ofits product line. You are given following budgeted data about rm for coming Year. Products F1 F2 F3 Sales in Units 000 120 100 00 Revenue (RS. 1:10000) 144 150 as Costs: Rs.) Material 430,000 500,000 240,000 Labor 320,000 400,000 160,000 Overheads M m m 14000,000 1550,000 760,000 ProtHLoss) 40,000 (50,000) 120,000 The company is concerned about the loss on products F2. It is considering ceasing production of it and switching the spare capacity of 100,000 units to product F3. You are told: 1 All production is sold. 11. 75% of the labor cost for each product variable in nature. iii. Fixed administration overheads 125.900, 000 in total have been apportioned to each product on the basis of Units sold and are included in overhead costs above. All other ovediead costs are variable in nature. iv. Ceasing production of product F2 would eliminate the xed labor charge associated with it and onesixth of xed administration overhead apportioned to Product F2. v. Increasing the production F3 by 100,000 units would mean that xed labor cost associated with product F3 would double, the variable labor cost would rise by 20% and its selling price would have to be decreased by Rs. 1.50 in order to achieve the increased sales. Required: a) Prepare marginal cost statement for a unit of each product on the basis of: i. The original budget: ii. If product F2 is deleted. b) Prepare a statement showing total contribution and prot of each product group on the basis of: i. The original budget: ii. If product F2 is deleted. c) Using result (a) and (b) advice whether product F2 should be deleted from product range, giving reasons for your decisions. (Marks 5)