CA Intermediate · Cost and Management Accounting · Marginal Costing
Sundaram Plastics sells a product at ₹50 per unit. Variable cost is ₹30 per unit and fixed costs are ₹2,40,000 a year. What sales quantity is needed to earn a profit of ₹60,000?
The company needs to sell 15,000 units. Contribution is ₹20 per unit, and fixed costs of ₹2,40,000 plus desired profit of ₹60,000 total ₹3,00,000, which divided by ₹20 gives 15,000 units.
- A12,000 units
- B15,000 unitsCorrect
- C9,000 units
- D10,000 units
Explanation
Contribution per unit = 50 - 30 = ₹20. Required units = (Fixed cost + Desired profit) / contribution per unit = (2,40,000 + 60,000)/20 = 15,000 units. Check: 15,000 x 20 = 3,00,000; less fixed 2,40,000 = 60,000 profit. Using only fixed cost gives 12,000 units, which is the break-even point and ignores the target profit.
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