Theexistingmanufacturingunitshasyearly fixed overheads of Rs.1,00,000. It wished to expand the production by purchasing oneof the two types of machinery Model A andModel B, each costing Rs.5,00,000 andhaving the estimated life of 5 years.TheestimatedannualSalesandCostunderbothofthesemodelsaregiven asunder:
ModelA(Rs.)ModelB(Rs.)
Sales20,00,00024,50,000
Materials9,20,00011,12,200
Labour4,12,4505,67,800
Variable Overheads3,80,9004,95,670
Compute the comparative profitabilityof each model of machinery under the payback period and alsocalculate payback profitability. Ignore depreciation and taxation.
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