A company has a capacity of producing 50,000 units of a certain product in a month. The sales department reports that the following schedule of sales prices is possible.

Volume of Production

Selling Price Unit Rs.

60%

0.90

70%

0.80

80%

0.75

90%

0.67

100%

0.61.

The variable cost of manufacture between these levels is Re. 0.15 per unit and the fixed cost is Rs. 20,000.

  1. You are required to prepare a statement showing the incremental revenue and the differential cost at each stage. At which volume of production will the profit be the maximum?
  2. If there is a bulk order at Re. 0.50 per unit for the balance capacity over the maximum profit and the volume for export and price quoted will not affect the internal sale, state whether this offer should be accepted and why?