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Vishal Nama   27 September 2021

Costing under marginal costing.

AVONA LTD., a toy factory presents the following information for the year ended 31st March, 2018:

Material cost Rs 1,20,000
Labour cost Rs 2,40,000
Fixed overheads Rs 1,20,000
Variable overheads Rs 60,000
Units produced Rs 12,000
Selling Price per Unit Rs 50

The available capacity is a production of 20000 units per year. The firm has an offer for the purchase of 5000 additional units at a price of Rs.40 per unit. It is expected that by accepting this offer there will be a saving of rupee one per unit in material cost on all units manufactured, the fixed overhead will increase by Rs.35,000 and the overall efficiency will drop by 2% on all production.

1.If the order is accepted, AVONA LTD. will operate at
90% capacity
85% capacity
80% capacity
75% capacity

2.If the offer for purchase of additional units is accepted then the contribution would be _____
Rs 2,00,000
Rs 2,15,000
Rs 2,15,100
Rs 2,15,200

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