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    Question

    A company produces 10,000 units of a product. The fixed

    cost is ₹2,00,000, variable cost per unit is ₹40, and the selling price is ₹70 per unit. If an export order for 2,000 units at ₹55 per unit is received, what will be the impact on total profit, assuming no capacity constraint?
    A Profit increases by ₹30,000 Correct Answer Incorrect Answer
    B Profit increases by ₹1,10,000 Correct Answer Incorrect Answer
    C Profit decreases by ₹10,000 Correct Answer Incorrect Answer
    D Profit remains unchanged Correct Answer Incorrect Answer
    E Profit increases by ₹10,000 Correct Answer Incorrect Answer

    Solution

    For the export order, only variable costs are relevant as fixed costs are already covered. Contribution per unit from order = Selling Price - Variable Cost = 55 - 40 = ₹15. Total contribution from 2000 units = 2000 * 15 = ₹30,000. Since this is additional contribution, profit increases by ₹30,000.

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