Your company produces two products P and Q. The relevant data per unit of output are given as follows:
|
|
P (Rs.) |
Q (Rs.) |
|
Cost of Direct Material |
28.00 |
13.00 |
|
Direct Labour |
15.00 |
25.00 |
|
Variable Factory Overheads |
25.00 |
12.50 |
|
Fixed Factory Overheads |
10.00 |
5.00 |
|
Variable Selling Expenses |
14.00 |
10.00 |
|
Total Cost |
92.00 |
65.50 |
|
Selling Price |
100.00 |
70.00 |
|
Profit |
8.00 |
4.50 |
Factory overheads are applied on the basis of machine hour. The existing plant and infrastructure will allow production and sale of either P or Q. Both the products are processed through the same production centre.
You are required to suggest which product should be processed and sold.