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Management Accounting - Enterprise Performance Management

Problem No. 3

S.V.Ltd budgets to make 1,00,000 units of product P. The variable cost per unit is Rs.10. Fixed costs are

Rs.6,00,000.

The finance Director suggested that the cost-plus approach should be used with a profit mark-up of 25%.

However, the Marketing Director disagreed and has supplied the following information:

At the SP of Rs. 24/unit, the profit is maximum and hence that price must be fixed for the product.

Ans:

As Management Accountant of the Company analyse the above proposals and comment.

26 54,00024 64,000

22 70,000

20 76,000

18 84,000

(Rs.) (Unit)

Price per unit Demand

E TWAWEZAE TWAWEZA 2012