The cost per unit of the three products X, Y and Z are given as follows:
|
Particulars |
X (Rs.) |
Y (Rs.) |
Z (Rs.) |
|
Direct Material |
20 |
16 |
18 |
|
Direct Labour |
12 |
14 |
12 |
|
Variable Overheads |
8 |
10 |
6 |
|
Fixed Expenses |
6 |
6 |
4 |
|
46 |
46 |
40 |
|
|
Profit |
18 |
14 |
12 |
|
Selling Price |
64 |
60 |
52 |
|
No. of units Produced |
10,000 |
5,000 |
8,000 |
Production arrangements are such that if one product is given up, the production of the others can be raised by 50%. The directors propose that Product Z should be given up because the contribution from the product is the lowest.
Present a suitable analysis of the data indicating whether the proposal should be accepted or not.