Question

1. Management of ABC and Co.Is examining a proposal to expand capacity which is expected
to increase its sales Rs. 30,00,000 per year to Rs. 40,00,000 per year. The fixed cost
involved in the expansion is Rs. 250,000. The cost, sales and profit data of the firm for the
previous year are as below:
Sales
: Rs. 25,00,000
Fixed cost :Rs. 7,50,000
Variable cost : Rs. 16,00,000
Net Profit : Rs. 1,50,000
Given the above conditions, should the management of the company decide to go it for
expansion of the capacity?

Answer 1

Answer:

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