The manager of a Co, provides you with the following information: Sales 4,00,000 Costs: Variable (60% of sales) Fixed cost 80,000 Profit before tax 80,000 Income tax Net profit 32,000 The company is thinking of expanding the plant. The increased fixed cost with plant expansion will be 40.000. It is estimated that the maximum production in new plant will be worth 2,40,000. The company also wants to earn additional income 3,200 on investment. On the basis of computations give your opinion on plant expansion. Statement showing computation of profit before and after plant expansion Sr. No. Particulars Present (Before Expansion Total (After expansion)) Value() expansion) () (0) Sales 4,00,000 2,40,000 6,40,000 (ii) Variable cost (60%) 2.40.000 1,44.000 3.84.000 Contribution ( iii) 1,60,000 96,000 2.56.000 (iv) Fixed Cost 80,000 40,000 1,20,000 (v) Profit before tax (iii-iv) 80,000 56,000 1.36,000 (VI) Profit after tax (V x 0.40) 32,000 22.400 54,400 From the above computations, it was found that the profit is increased by 22,400 by expanding the plant, which is much higher than the expected income of 3,200, one's opinion should be in favour of plant expansion 19 Prob. A manufacturer with overall (interchangeable among the products) capacity of 1,00.000 machine hours has been so far producing a standard mix of 15,000 units of product A. 10,000 units of product B and C each. On experience, the total expenditure exclusive of his fixed charges is found to be 2.09 lakhs and the cost ratio among the product approximately 1, 1.5, 1.75 respectively per unit. The fixed p19 charges comes to 2 per unit. When the unit selling prices are 6.25 for A, 7.5 for B and 10.5 for C. He incurs a loss. Mix-1 Mix-11 15,000 6,000 13,000 18,000 12,000 7,000 Mix-111 22.000 8,000 8,000 B As a management accountant what mix will you recommend