To prepare a marginal cost statement for XYZ Ltd. At 60% and 80% of capacity, we’ll first calculate the variable and fixed costs at each level of capacity.
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The given cost structure is as follows:
1. Material Cost: Rs. 100 per unit
2. Wages: Rs. 30 per unit
3. Factory Overheads: Rs. 30 per unit (40% fixed)
4. Administrative Overheads: Rs. 20 per unit (50% fixed)
5. Selling Price: Rs. 200 per unit at 50% capacity
Let’s calculate the costs and profits at 60% and 80% capacity:
1. At 60% Capacity:
– Units produced = 60% of 10,000 units = 6,000 units
– Variable Cost per unit = Material Cost + Wages = Rs. 100 + Rs. 30 = Rs. 130
– Fixed Factory Overheads = 40% of Rs. 30 = Rs. 12 per unit
– Fixed Administrative Overheads = 50% of Rs. 20 = Rs. 10 per unit
– Total Cost per unit = Variable Cost + Fixed Factory Overheads + Fixed Administrative Overheads = Rs. 130 + Rs. 12 + Rs. 10 = Rs. 152
– Selling Price per unit = Rs. 200
– Estimated Profit per unit = Selling Price – Total Cost = Rs. 200 – Rs. 152 = Rs. 48
– Estimated Profit at 60% capacity = Profit per unit x Units produced = Rs. 48 x 6,000 = Rs. 2,88,000
2. At 80% Capacity:
– Units produced = 80% of 10,000 units = 8,000 units
– Variable Cost per unit remains the same at Rs. 130
– Fixed Factory Overheads = 40% of Rs. 30 = Rs. 12 per unit
– Fixed Administrative Overheads = 50% of Rs. 20 = Rs. 10 per unit
– Total Cost per unit = Variable Cost + Fixed Factory Overheads + Fixed Administrative Overheads = Rs. 130 + Rs. 12 + Rs. 10 = Rs. 152
– Selling Price per unit = Rs. 200 * 0.95 (5% price reduction) = Rs. 190
– Estimated Profit per unit = Selling Price – Total Cost = Rs. 190 – Rs. 152 = Rs. 38
– Estimated Profit at 80% capacity = Profit per unit x Units produced = Rs. 38 x 8,000 = Rs. 3,04,000
So, the estimated profit of the business at 60% capacity is Rs. 2,88,000, and at 80% capacity, it’s Rs. 3,04,000.