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?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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