Capacity engaged (%) 20 40 40 100 Units produced 2,000 5,000 6.000 Sales revenue 280,000 23,82,500 25,35,500 29,98,000 Loss variable costs (new) 74,000 2,84,000 4.04.400 7,62,400 Contribution 6,000 98,500 1,31,100 2,35,600 Less fixed costs 1.17.000 Net profit 1,18,600 Assumptions (1) Selling price per unit as well as variable cost per unit pertaining to product A does not increase (11) Profitability statement with products A, B and taken together is prepared on the basis of revised cost data, as variable costs as well as selling prices in respect of products B and C will increase, irrespective of the fact whether product A is dropped or not. The only point of difference is the number of units produced. j79 20.0 108.0 P.23.9 The following costs and other data apply to two component parts used by Bajaj Electricals Ltd: Particulars Part X Party Direct material 28.0 2160.0 Direct labour 94.0 Overheads 80.0 40.0 Unit cost 294.0 Units needed per year 6,000 8,000 Machine-hours per unit 1 Unit cost, if purchased 100 300 The company hitherto has been manufacturing all its required components. However, in the current years, only 14,000 hours of otherwise idle machine time can be devoted to the production of compo- nents. Accordingly, some of the parts must be purchased from outside suppliers. In producing parts, overhead is applied at 240 per machine-hour. Fixed capacity costs, which will not be affected by any make or buy decision, represent 70 per cent of the applied overhead. 2