PARTICULARS Rs.

DIRECT MATERIAL COST 275,000 Current capac 10,000

DIRECT LABOUR COST 325,000 sales 7500
OVERHEADS 80,000 price 155
FIXED MANUFACTURING COST OVERHEADS 275,000
FIXED MARKETING COST 175,000 ADDITIONAL 2500
1,130,000 PRICE 120
PLANT CAPAC 9000

PQR received a special one-time only order

for 2500 medals at Rs.120 per medal

Required details
1 Suppose thePQR
Should plantaccept
capacity
thewas 9000
special medals
oder? Why?instead
2 of 10,000 medlas each month. The special oder
must be taken either in full or rejected totally.
Analyse whether PQR ltd. should accept the special
order or not.
 PARTICULARS AMOUNT(Rs.) AMOUNT(Rs.)
A. Selling price per unit ₹ 155.00
B. Variable cost per unit
Direct Material (2,75,000/7500) ₹ 36.67
Direct Labour ₹ 43.33
Overheads ₹ 10.67 ₹ 90.67
C. Contribution per unit (A-B) ₹ 64.33
D. Total Contribution ₹ 680,000.00
E. Fixed costs
Fixed manufacturing cost ₹ 275,000.00
fixed marketing costs ₹ 175,000.00 ₹ 450,000.00
F Profits (D-E) ₹ 230,000.00

THE OFFERED PRICE FOR THE ADDITIONAL DEMAND OF 2500MEDALS IS MORE THAN THE CARUBALE COST PER U
DEMAND WILL CONTRIBUTE TOWARDS FIXED COST AND PROFIT.

PARTICULARS AMOUNT(Rs.) AMOUNT(Rs.)

A. SALES VALUE ₹ 1,462,500.00
B. VARIABLE COST ₹ 906,666.67
C. CONTRIBUTION (A-B) ₹ 555,833.33
D. FIXED COST
FIXED MANUFACTURING COST ₹ 275,000.00
FIXED MARKETING COST ₹ 175,000.00 ₹ 450,000.00
E. PROFIT (C-D) ₹ 105,833.33

THE OFFER FOR 2500 UNITS SHOULD NOT BE ACCEPTED AS THERE IS A DECREASE IN THE PROFIT BY Rs.124166

6500

PARTICULARS AMOUNT(Rs.) AMOUNT(Rs.)

A. Sales value ₹ 1,307,500.00
B. Variable Cost ₹ 816,000.00
C. Contribution (A-B) ₹ 491,500.00
D. Fixed cost
Fixed manufacturing cost 275,000
fixed marketing costs 175,000 450,000
E. Profit (C-D) ₹ 41,500.00

BY ACCEPTING THE SPECIAL ORDER AT Rs. 120 per unit the total profit of the company is decreeased by 18850
THE CARUBALE COST PER UNIT. ANY ADDITIONAL
T AND PROFIT.

-124166.67

N THE PROFIT BY Rs.124166 (1,05,833-2,30,000)

₹ 188,500.00

any is decreeased by 188500(2,30,000 -41,500)