A company is at present working at 90% of its capacity and producing 13,500 units per annum. The following figures are obtained from its budget:

90% Rs.

100% Rs.

Sales

7,50,000

8,00,000

Fixed expenses

1,50,250

1,50,250

Semi-fixed expenses

48,750

50,250

Variable expenses

72,500

74,750

Units produced

13,500

15,000

Labour and material cost per unit are constant under the present conditions.

  1. You are required to determine the differential cost of producing 1,500 units by increasing the capacity to 100%.
  2. What would you recommend for an expert price for these 1,500 units taking into account that the overseas prices are much lower than the domestic prices?