XYZ. Ltd. Is currently working at 50oA capacity and produces 10,000 units. At 60% capacity raw material cost increased by 2% and selling price falls by 2 percent. At 80% capacity raw material cost increased by 5% and selling price falls by 5%. At 50% capacity the product costs Rs. 180 per unit and is sold at Rs. 200 per unit. The UIIIL itcost UUSof U Rs. 1 80 comprises the following P”.ti””1″t SgS g Rs. Material 100 Wages 30 Factory overheads 30 (40% fixed) Admini strative Overheads 20 (50% fixed) Prepare a marginal cost statement showing the estimated profit of the business when it is operating at60Yo and 80% ofcapacity

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Certainly! Let’s prepare a marginal cost statement for XYZ Ltd. at 60% and 80% of capacity.

Given Data:

  • Capacity: 10,000 units
  • Current Working Capacity: 50%
  • Product Cost at 50% capacity: Rs. 180 per unit (Material: Rs. 100, Wages: Rs. 30, Factory Overheads: Rs. 30)
  • Selling Price at 50% capacity: Rs. 200 per unit
  • Increases/Decreases at 60% and 80% capacity in raw material cost and selling price

Marginal Cost Statement at 60% Capacity:

  1. Variable Costs:
  • Material: Rs. 100 + (2% increase at 60% capacity)
  • Wages: Rs. 30
  • Factory Overheads: Rs. 30
  1. Total Variable Cost per Unit at 60% Capacity:
    [ \text{Variable Cost/Unit} = \text{Material} + \text{Wages} + \text{Factory Overheads} ]
  2. Total Variable Cost for 10,000 Units at 60% Capacity:
    [ \text{Total Variable Cost} = \text{Total Variable Cost/Unit} \times \text{Number of Units Produced} ]
  3. Selling Price at 60% Capacity:
    [ \text{Selling Price/Unit} = \text{Current Selling Price} – 2\% ]
  4. Total Sales Revenue at 60% Capacity:
    [ \text{Total Sales Revenue} = \text{Selling Price/Unit} \times \text{Number of Units Produced} ]
  5. Contribution Margin at 60% Capacity:
    [ \text{Contribution Margin} = \text{Total Sales Revenue} – \text{Total Variable Cost} ]
  6. Fixed Costs at 60% Capacity:
    [ \text{Fixed Costs} = \text{50% of Factory Overheads} + \text{50% of Administrative Overheads} ]
  7. Estimated Profit at 60% Capacity:
    [ \text{Estimated Profit} = \text{Contribution Margin} – \text{Fixed Costs} ]

Marginal Cost Statement at 80% Capacity:

Repeat the above steps with the adjustments for 80% capacity (5% increase in raw material cost and 5% decrease in selling price).