Reference no: EM132561506

Given below are the details of cost of production of two products, A and B, manufactured by a company. Both the products use the same materials :

                                                                           A                                      B

Percentage of total capacity utilised        60%                               40%

Units produced                                        1,200                           2,000

Sales price per unit (Rs.)                          2,000                             1,200

Cost per unit (Rs.)

Raw materials                                            1,400                          700

Direct labour                                                   200                      150

Variable expenses                                              180                  230

Question 1: Assuming that the fixed overheads of Rs. 3,00,000 remain unchanged, would you recommend increasing the capacity utilized on Product A to 70%? Do you have any alternative recommendation to make?