A company is currently operating at 80% capacity level. The production under normal capacity level is 1,50,000 units. The variable cost per unit is ` 14 and the total fixed costs are ` 8,00,000. If the company wants to earn a profit of ` 4,00,000, then the price of the product per unit should be
Correct answer: C. 24.00
- A. 37.50
- B. 38.25
- C. 24.00
- D. 35.00
Explanation
At 80% capacity, output is 150,000 × 80% = 120,000 units. Required selling price is (120,000 × 14 + 800,000 + 400,000) ÷ 120,000 = 24 per unit.
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Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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