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Sr. No. Particulars B () 1,12,000 ( (3) 56,000 Total () 1,68,000 1. II. 7,000 21,000 14,000 5,600 7.000 12,600 Sales Variable cost Direct Material
Sr. No. Particulars B () 1,12,000 ( (3) 56,000 Total () 1,68,000 1. II. 7,000 21,000 14,000 5,600 7.000 12,600 Sales Variable cost Direct Material Direct Labour Direct expenses Total Variable Cost Contribution (i - iii) Fixed cost Profit (iv - V) 14,000 33,600 78,400 7,000 21,000 35,000 III. IV. V. VI. 21.000 54,600 1,13,400 70,000 43,400 From the above computations, it was found that profit is decreased by (63,000 - 343,400) 19.600 by closing down division 'C', it should not be closed down. In other words, as long as if there is a contribution of 1, from division 'C', it should not be closed down. Illustration 18: Mr. Young has 1.50,000 investment in a business. He wants a 15% profit on his money. From an analysis of recent cost figures he finds that his variable cost of operating is 60% of sales; his fixed costs are 75,000 per year. Show supporting computations for each answer. (a) What sales volume must be obtained to break-even? (b) What sales volume must be obtained to his 15% return on investment? (c) Mr. Young estimates that even if he closed the doors of his business he would incur 25.000 expenses per year. At what sales would be better off by locking his sales up
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