CA Final Costing Problem

Ravi SADhiyan (Practice) (4510 Points)

20 May 2020  

A company is producing two types of products Q and R simultaneously from input of raw material Z. Presently the company is producing 45,000 kgs of Q and 90,000 kgs of R from input of 1,35,000 kgs of raw material Z. The selling price of Q is Rs. 15 and that of R is Rs. 12 per unit. Processing cost per month is as follows:

Rs.
Raw Material (1,35,000 kgs @ Rs. 6 per Kg) 8,10,000
Variable Processing Cost 5,40,000
Fixed Processing Cost 3,50,000
Total 17,00,000

A company has given an offer of purchase of 40,000 kgs of R additionally at a price of Rs. 9 per unit. Raw material is easily available in the market. The existing market of R will not be affected by accepting the offer, but price of Q is likely to be decreased uniformly on all sales.

 

Required
Calculate minimum reduced average price of Q to sustain the increased sales.