You are required to suggest which product should be processed and sold.
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Your company produces two products P and Q. The relevant data per unit of output are given as follows:
P (Rs.)
Q (Rs.)
Cost of Direct Material
28.00
13.00
Direct Labour
15.00
25.00
Variable Factory Overheads
25.00
12.50
Fixed Factory Overheads
10.00
5.00
Variable Selling Expenses
14.00
10.00
Total Cost
92.00
65.50
Selling Price
100.00
70.00
Profit
8.00
4.50
Factory overheads are applied on the basis of machine hour. The existing plant and infrastructure will allow production and sale of either P or Q. Both the products are processed through the same production centre.
You are required to suggest which product should be processed and sold.
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