Please solve this question?

Question

Ambitious Enterprise is currently working at 50% capacity and produces 10,000

units. At 60% working capacity, raw material cost increases by 2% and selling

price falls by 2%. At 80% capacity level, raw material cost increases by 5% and

selling price falls by 5%.

At 50% capacity level, the product costs Rs. 180 per unit and is sold at Rs. 200

per unit. The unit cost of Rs. 180 is made up as follows:

Rs.

Material 100

Wages 30

Factory overheads (40% fixed) 30

Administration overheads (50% fixed) 20

Total per unit Cost 180

Prepare Marginal Cost statement showing the estimated profit of the business

when it is operated at 60% and 80% capacities level.

Answer 1

At 60% capacity, units produced & sold will be 10,000/50%*60% = 12,000

Price  = 200 x 0.98 = 196, revenue = 2,352,000

VC = Material + Wages + Var Factory OH + Var Admin OH = 102 + 30 +18 + 10 = 160, VC = 1,920,000

CM = Revenue - VC = 432,000

FC = (Var Factory OH + Var Admin OH)  x 10,000 = ((40% x 30) + (50% x 20)) * 10,000 = 220,000

GP = 432,000 - 220,000 = 212,000

At 80% capacity, units produced & sold will be 10,000/50%*80% = 16,000

Price  = 200 x 0.95 = 190, revenue = 3,040,000

VC = Material + Wages + Var Factory OH + Var Admin OH = 102 + 30 +18 + 10 = 160, VC = 2,608,000

CM = Revenue - VC = 432,000

FC = (Var Factory OH + Var Admin OH)  x 10,000 = ((40% x 30) + (50% x 20)) * 10,000 = 220,000

GP = 432,000 - 220,000 = 212,000