31 Dec Alaska Paints, working at a normal capacity, manuf
Alaska Paints, working at a normal capacity, manufactures 4,00,000 tins per year. The cost of manufacturing per tin is as follows: Consumption of Materials 15.60 Direct Wages 4.20 Variable Factory Overheads 5.00 Fixed Overheads 8.00 32.80Variable selling and administrative expenses amount to Rs. 1.25 per tin. Each tin is sold for Rs. 45.00.During the next quarter, only 20,000 tins can be sold. The management plans to shut down the plant estimating that the manufacturing Fixed Costs can be reduced by Rs.1,48,000 for the quarter. While the plant is in operation, fixed overheads are incurred at a uniform rate.You are required to suggest: (a) whether the plant should be shut down at this level; and (b) at what level of activity per quarter, the plant should be shut down.
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