Question:-
M/s. ABC and Co. is planning to use the most competitive manufacturing process to produce an ultramodern sports shone. They produce an ultramodern sport shoe. They van use a fully automatic robot-controlled plant with an investment of Rs. 100 million; alternately they can go in for a cellular manufacturing that has a fixed cost of Rs. 80 million. There is yet another choice of traditional manufacture that needs an investment of Rs. 75 million only. The fully automatic plant can turn out a shoe at a unit variable cost of Rs. 25 per unit, whereas the cellular and the job shop layout would lead to a variable cost of Rs. 40 and Rs. 50 respectively. The break even analysis shows that the break even quantities using automatic plant Vs. traditional plant are in the ratio of 1:2 the per unit revenue used in the break even calculation is
Option (A)
Rs. 75
Option (B)
Rs. 87
Option(C)
Rs. 57
Option(D)
Rs. 65
Correct Option:
(D)
Question Solution:
Let the variable cos t be Cv
Let break even quantity for fully automatic plant is ‘x’ & break even quantity, for traditional plant is ‘y’
100 x 106 + 25 x = Cvx ….(1)
75 x 106 + 50 y = Cv y …..(2)
\ (x/y) = 1/2
Or y = 2x
Dividing equation (1) by (2)
Or (100 x 106 + 25x)/(75 x 106+50(2x)) = x/2x (since y = 2x)
Or {(100 x 106) + 25x}2 = 75 x 106 + 100x
Or 200 x 106 + 50x = 75 x 106 + 100x
Or 50x = 125 x 106
\ x = 25 x 105
(Cv-25) x 25 x 105 = 100 x 106
Cv -25 = 40
\ Cv = 40 + 25 = 65