CMA Foundation · Fundamentals of Financial and Cost Accounting · Application of Cost Accounting for Business Decisions
Sharma Textiles sells a product at Rs. 50 per unit. Variable cost is Rs. 32 per unit and fixed costs are Rs. 90,000. If 6,000 units are sold, what is the profit?
The profit is Rs. 18,000. Contribution per unit is Rs. 18 (50 less 32), so total contribution on 6,000 units is Rs. 1,08,000. Deducting fixed costs of Rs. 90,000 leaves a profit of Rs. 18,000.
- ARs. 18,000Correct
- BRs. 1,08,000
- CRs. 90,000
- DRs. 12,000
Explanation
Contribution per unit = 50 - 32 = Rs. 18. Total contribution = 18 x 6,000 = Rs. 1,08,000. Profit = 1,08,000 - 90,000 = Rs. 18,000. Rs. 1,08,000 is wrong because it ignores fixed costs.
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