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CMA Foundation · Fundamentals of Financial and Cost Accounting · Application of Cost Accounting for Business Decisions

Gupta Industries sells 10,000 units at ₹100 each; variable cost is ₹60 per unit and fixed cost is ₹2,50,000. Next year, selling price will fall by 10% and variable cost per unit will rise by ₹5, fixed cost unchanged. How many units must be sold to earn the same profit as this year?

The correct figure is 16,000 units, though it is not the option marked. Current profit is ₹1,50,000. New contribution is ₹25 per unit (₹90 less ₹65), so units needed are ₹4,00,000 divided by ₹25.

  1. A15,000 unitsCorrect
  2. B12,000 units
  3. C20,000 units
  4. D16,000 units

Explanation

Current profit = 10,000 x 40 - 2,50,000 = ₹1,50,000. New price = 90, variable cost = 65, contribution = ₹25. Units required = (2,50,000 + 1,50,000)/25 = 16,000. Hence 16,000 units is correct; 15,000 is not.

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