The cost per unit of the three products A, B and C of a concern are as follows:
|
Particulars |
A (Rs.) |
B (Rs.) |
C (Rs.) |
|
Variable Cost |
20 |
20 |
18 |
|
Fixed Cost |
3 |
3 |
2 |
|
Total Cost |
23 |
23 |
20 |
|
Profit |
9 |
7 |
6 |
|
Selling Price |
32 |
30 |
26 |
|
No. of units Produced |
10,000 |
5,000 |
8,000 |
Production arrangements are that if one product is given up, the production of the others can be raised by 50%. The directors propose that C should be given up because the contribution in that case is the lowest.
Do you agree? What other non-cost considerations should be kept in mind before taking any decision in such a situation?