10 Nov Although Kaloo Ltd has the capacity to produce 16,
Although Kaloo Ltd has the capacity to produce 16,000 units per month, it currently produces and sells only 10,000 units per month at Rs. 15 each. Following are the details of costs per unit at the current level of production: Direct Material 5.00 Direct Labour 3.00 Variable Factory Overheads 0.75 Fixed Factory Overheads 1.50 Variable Selling Expenses 0.25 Fixed Administrative Expenses 1.00 11.50 Should the company accept a special order of 4,000 units at Rs. 10 per unit? What is the maximum price the company should be willing to pay to the outside supplier who is interested in manufacturing this product? What would be the effect on the monthly contribution margin if the selling price is reduced to Rs. 14 each, resulting in a 10% increase in the sales volume?
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