A company producing 24,000 units provides you the following information:
|
|
|
|
Direct Materials |
1,20,000 |
|
Direct Wages |
84,000 |
|
Variable Overheads |
48,000 |
|
Semi-variable Overheads |
28,000 |
|
Fixed Overheads |
80,000 |
|
Total cost |
3,60,000 |
The product is sold at Rs. 20 per unit. The management proposes to increase the production by 3,000 units for sales in the foreign market. It is estimated that the semi-variable overheads will increase by Rs. 1,000. But the product will be sold at Rs. 14 per unit in the foreign market. However, no additional capital expenditure will be incurred.
The management seeks your advice as a Cost Accountant. What will you advise them?