A mechanical toy factory presents the following information for the year 2009:
|
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 |
12,000 |
|
Selling Price per unit |
Rs. 50 |
The available capacity is a production of 20,000 units per year. The firm has an offer for the purchase of 5,000 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 the material cost on all the units manufactured, the fixed overheads will increase by Rs. 35,000 and the overall efficiency will drop by 2% on all production.
State whether the offer is acceptable or not.