marginal costing

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pankaj kumar gupta (Querist)

29 April 2010 Marginal Costing

A-One Co. Produced 400000 components Of A Machinery Annually At 80% Of Full Capacity . Selling Price 33. Budgeted Annual Production Cost & Expenses For The Year.
Raw Material Csot Per Unit : 4.25
Direct Labour ……………………: 5.75
Variable Factory Over Head : 7.75
Variable Selling Cost: 5% Of Selling Price
Fixed Factory & Adm. Overhead: 3950000.

During The Year A-One Co. Received A One Time Order To Sell 25000 Components For Which No Selling Expenses Will Be Incurred . What Should Be The Minimum Price Quoted By A-One Co. If It Wants To Earn Minimum Of Re .1 Per Component On This Order.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

29 April 2010 In the given problem the plant having further capacity of producing 100000 components hence we can assume there will not be any further increse of fixed cost to accept this order because of with in the installed capacity also all fixed cost recovered from the present sales and varriable selling cost also not there and only we will recover variable cost and required earning of Re.1

So Total Varriable cost (4.25+5.75+7.75)=17.75 plus Profir Re.1= Rs.18.75
I hope this will be corret

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