X Ltd is faced with the problem of shutting down or of continuing to operate at a loss. Data from records and estimates made by the company are as follows:
|
Normal capacity of plant Don't use plagiarized sources. Get Your Custom Essay on
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|
= 1,00,000 units/day |
|
Fixed costs when the plant operates |
= Rs. 2,00,000 per annum |
|
Fixed costs when the plant is shut down |
= Rs. 1,20,000 per annum |
|
Variable costs (direct labour, direct material, variable overhead) per unit |
= Rs. 40 |
|
Estimated selling price to meet competition |
= Rs. 50 |
|
Estimated sales volume at a new selling price |
= 10,000 units |
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