Question:
Jharna Ltd Co. is currently operating at 50% capacity and produces 10,000 units at a cost of Rs. 180 per unit, the details of which are as follows:
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Materials per unit
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100
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Wages per unit
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30
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Factory Overheads [40% fixed] per unit
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30
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Administration Overheads [50% variable] per unit
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20
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Current Selling Price per unit
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200
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At 60% capacity, the Material Cost per unit increases by 2% and the Selling Price per unit falls by 2%.
At 80% capacity, the Material Cost per unit increases by 5% and the Selling Price per unit falls by 5%.
Prepare a Marginal Cost Statement showing the Total Cost and Profit at 50%, 60% and 80% capacity of production. Also give your comments on the profitability at these levels of performance.