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  • Problem 04 Special Order

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    rikesh radhe
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    The document summarizes the financial details of a company that produces and sells jars. It is currently selling 10,000 jars at Rs. 1.25 per jar, but has the capacity to produce 20,000 jars. Accepting an export order for 10,000 additional jars at Rs. 0.75 per jar would allow the company to utilize its full capacity and result in a profit of Rs. 2,755 compared to a loss of Rs. 100 under the current situation.

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    Problem 04 Special Order (1)

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    The document summarizes the financial details of a company that produces and sells jars. It is currently selling 10,000 jars at Rs. 1.25 per jar, but has the capacity to produce 20,000 jars. Accepting an export order for 10,000 additional jars at Rs. 0.75 per jar would allow the company to utilize its full capacity and result in a profit of Rs. 2,755 compared to a loss of Rs. 100 under the current situation.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    16 views3 pages

    Problem 04 Special Order

    Uploaded by

    rikesh radhe
    The document summarizes the financial details of a company that produces and sells jars. It is currently selling 10,000 jars at Rs. 1.25 per jar, but has the capacity to produce 20,000 jars. Accepting an export order for 10,000 additional jars at Rs. 0.75 per jar would allow the company to utilize its full capacity and result in a profit of Rs. 2,755 compared to a loss of Rs. 100 under the current situation.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    of 3

    solution

    sales = 10,000 jars @Rs. 1.25 per jar


    normal production capacity is 20,000 jars

    particulars presently cost per unit


    Sales (in units) 10000 units

    Sales (in value ) =10,000 units * Rs. 1.25


    =Rs. 12,500
    Variable Cost:
    Direct Material 1000 0.10
    Direct Labour 2475 0.25
    power 140 0.01
    Jars 600 0.06
    Misc.Supplies 430 0.04
    Total variable cost 4645 0.46
    Contribution ( sales - variable cost) 7855
    Less: Fixed Cost 7955 0.80
    Profit -100 -0.01

    decision: acccept the export order, because, it will result in profit to the firm.
    if Export order is accepted
    20000 units

    =(10,000 units*Rs. 1.25) +


    ( 10,000 units * Re. 0.75)
    =Rs. 20,000
    contribution per unit under export order
    2000 =0.75- 0.46=0.29
    4950
    280
    1200
    860
    9290
    10710
    7955
    2755

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