The cost per unit of three products X,Y and Z of a company are given as follows:
|
Particulars |
Product X |
Product Y |
Product Z |
|
Direct material |
10 |
8 |
9 |
|
Direct labour |
6 |
7 |
6 |
|
Variable expenses |
4 |
5 |
3 |
|
Fixed expenses |
3 |
3 |
2 |
|
23 |
23 |
20 |
|
|
Profit |
9 |
7 |
6 |
|
Selling price |
32 |
30 |
26 |
|
Number of units |
20,000 |
10,000 |
16,000 |
|
Produced |
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 Z should be given up because the contribution from the product is the lowest. Present suitable analysis of the data indicates whether the proposal should be accepted.