CMA Intermediate · Cost Accounting · Marginal Costing
Aarav Plastics sells a product at Rs 80 per unit. Variable cost is Rs 52 per unit and fixed cost is Rs 2,80,000 per year. If sales are 12,000 units, what is the profit for the year?
The profit is Rs 56,000. Contribution per unit is Rs 28 (80 less 52), giving total contribution of Rs 3,36,000 on 12,000 units. Deducting fixed cost of Rs 2,80,000 leaves Rs 56,000 as profit under the marginal cost equation.
- ARs 56,000Correct
- BRs 3,36,000
- CRs 1,20,000
- DRs 6,16,000
Explanation
Contribution per unit = 80 - 52 = Rs 28. Total contribution = 28 x 12,000 = Rs 3,36,000. Profit = 3,36,000 - 2,80,000 = Rs 56,000. Rs 3,36,000 is wrong because it ignores fixed cost.
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