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The present output details of manufacturing department of X Ltd. are as follows: Average output per week 48,000 units Saleable value of output *
The present output details of manufacturing department of X Ltd. are as follows: Average output per week 48,000 units Saleable value of output * 60,000 Contribution made by above * 24,000 The management plan to introduce more mechanisation in the department at a capital cost of *16,000. As an effect of this the number of employees will be reduced from the existing strength of 160 nos. to 120 nos. but the output of individual employee will increase by 60%. As an incentive to achieve the extra output, the management propose to offer an one per cent increase in the existing piece work price of Re. 0.10 per article for every 2% increase in the individual output achieved, hi order to sell the increased output, it will be necessary to reduce the sale price by 4%. You are required to calculate extra weekly contribution resulting from the proposed changes, as above, and give your recommendation.
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