A company has a capacity of producing 1,00,000 units of a certain product in a month. The sales department reports that the following schedule of sale prices is possible:
|
Volume of Production |
Selling Price Per Unit Re. |
|
60% |
1.00 |
|
70% |
0.90 |
|
80% |
0.85 |
|
90% |
0.75 |
|
100% |
0.69 |
The variable cost of manufacture between these levels is Re. 0.20 per unit and the fixed cost is Rs. 50,000.
- You are required to prepare a statement showing the incremental revenue and the differential cost at each stage. At which volume of production will the profit be at the maximum?
- If there is a bulk offer at Re. 0.60 per unit for the balance capacity over the maximum profit volume, as the export and the price quoted will not affect the internal sale, will you advise accepting this bid and why?