x ltd is faced with the problem of shutting down or of continuing to operate at a lo 609596

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

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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

Advise the company.

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