XYZ Ltd. is faced with the problem of shutting down or of continuing to operate at a loss. Data relating to the company are shown as follows:
|
Normal capacity of a plant day |
1,00,000 units/day |
|
Fixed costs when the plant is operating |
Rs. 75,000 p.a. |
|
Fixed costs when the plant is shut down |
Rs. 50,000 p.a. |
|
Variable costs per unit |
Rs. 20 |
|
Estimated selling price |
Rs. 23 |
|
Estimated sales volume at a new selling price: 10,000 units |
|
|
Advise the firm. |