(a) ABC Ltd. purchased raw materials last year for Rs.100 per unit and there appears to be no possibility of selling these materials or using them in future production except if a former customer places an order. The customer is prepared to place an order for the product that will require the whole of raw materials, but he is not willing to pay more than Rs.250 per unit. The costs of converting the raw materials into the product are Rs.200 per unit. Should the ABC Ltd. accept the order with reference to relevant and irrelevant cost?

(b) PQR Ltd. provides data relating to two levels of output and total costs at that level of output:

Month

October2020 Units 10,000 Total Cost (Rs.) 25,000

November 2020 Units 15,000 Total Cost (Rs.) 30,000

Find the Fixed Costs for PQR Ltd. (2+3=5 Marks)

Answer rating: 100% (QA)

a The relevant cost for ABC Ltd in this scenario would be the cost of converting the raw materia... View the full answer