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Cost of Producing
100 Pcs (Rs)
Direct Material
500.00
5.00
Direct Labour
150.00
1.50
Variable Overhead
100.00
1.00
Fixed overhead
250.00
2.50
Total
1000.00
10.00
4
Cost of Producing
101 Pcs (Rs)
Increase in
Cost (Rs)
Direct
Material
500.00
505.00
5.00
Direct
Labour
150.00
151.50
1.50
Variable
Overhead
100.00
101.00
1.00
Fixed
overhead
250.00
250.00
Total
1000.00
1007.50
7.50
Capa
city
Environme
Redu
nt
ndan Partial
t
Related
capacity
redundant
Yes
Full
Production
capacity
partly utilized
Yes
Production
capacity fully
utilized
Yes
Additio
nal
Capacit
y
Cost
Relationship
Decisi
on
Buy
Marginal cost +
Avoidable cost >
Purchase price
Buy
Buy
Use of
Marginal cost + new
additional
Yes
facility cost >
Buy
facility When the costs < Purchase price, the decision
Purchase
will beprice
Making
10
Recent days, the production has increased that all the components
are outsourced and only assembly occurs in Ashok Leyland
Workshop.
11