VRS Ltd has been offered a choice to buy one out of two machines—P and Q. You are required to compute:
- BEP for each of the two machines.
- The level of sales at which both machines would earn equal profit.
- The range of sales at which one is more profitable than the other.
The relevant data are as follows:
|
Machines |
||
|
P |
Q |
|
|
Annual output in units |
20,000 |
20,000 |
|
Fixed costs |
Rs. 60,000 |
Rs. 40,000 |
|
Profit at above level of production |
Rs. 60,000 |
Rs. 50,000 |
The market price of the product is expected to be Rs. 10/unit.