Q1a) Part 1

Variable Cost Per Unit = Rs. 11

Fixed Cost = Rs.20,000

Part 2
Loss = Rs 61,250

Part 3
Loss = Rs 47,500

EXPLANATION
Question 1a

Part 1.

Variable Cost Per Unit = Material Cost per Flange + Labour Cost Per Flange

10 +(20/20)
10 +1
RS. 11

Total Fixed Cost = Fixed ManuFacturing Cost + Other Fixed Non Manufacturing Cost
10000+10000
20000

Part 2

Competitor Price = Rs. 8.25 Per Flange

Lets Calculate the profit/loss of company at 15000 Units Level

Sales - Material Cost - Labour Cost - Fixed Cost

(15000 * 8.25) - (15000 * 10) -(15000 * 1) - (20,000)
-61250

Loss = Rs. 61,250

Hence, Company Don’t Sell at or Below the Rs. 8.25 Per Unit

Part 3

If Company Sale 10000 Units :

Lets Calculate the profit/loss of company at 15000 Units Level
Sales - Material Cost - Labour Cost - Fixed Cost

(10000* 8.25) - (10000 * 10) - (10000 *1) - (20,000)

Loss = Rs . 47,500

Loss Of Company reduce, but still company suffers loss.

Question 1 B

Direct Materails 370,000

Labour 360,000
Overhead 270,000
Total Manufacturing Cost 1,000,000
Beginning Work in Process 120,000
Total Cost of Woek In Process During the year 1,120,000
less Ending Work In Process 150,000
Cost of Goods Manufacturing 970,000
Explanation
Overhead=1,000,000 * 27% = 270,000
Labour = 270,000/75% = 360,000
Materails = 1,000,000 - 360,000 - 270,000= 370,000
Engding WIP=1,000,000-970,000-30,000/20%=150,000
Beginning WIP= 150,000 * 80% = 120,000