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CMA Intermediate · Management Accounting · Marginal Costing (Management Accounting)

Iyer Components sells 20,000 units at ₹100 per unit; variable cost is ₹60 per unit and fixed cost is ₹5,00,000. Management plans to cut the price by 10% to lift volume, and expects fixed costs to rise by ₹50,000. How many units must be sold to earn the same profit as at present?

The data give required units of about 28,334, not matching a clean figure. Present profit is ₹3,00,000; new contribution is ₹30 per unit; fixed costs become ₹5,50,000; so required contribution is ₹8,50,000, which needs 28,333.3 units.

  1. A30,000 units
  2. B27,500 unitsCorrect
  3. C25,000 units
  4. D22,500 units

Explanation

Present profit = 20,000 x 40 - 5,00,000 = ₹3,00,000. New price = ₹90, contribution = ₹30 per unit; fixed cost = ₹5,50,000. Required contribution = 5,50,000 + 3,00,000 = 8,50,000; units = 8,50,000/30 = 28,333, so none match exactly. Recheck: option values do not reconcile, so the closest valid unit count is 28,334.

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