The cost per unit of the three products A, B and C of a concern are as follows:
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The cost per unit of the three products A, B and C of a concern are as follows:
Particulars
A (Rs.)
B (Rs.)
C (Rs.)
Variable Cost
20
20
18
Fixed Cost
3
3
2
Total Cost
23
23
20
Profit
9
7
6
Selling Price
32
30
26
No. of units Produced
10,000
5,000
8,000
Production arrangements are that if one product is given up, the production of the others can be raised by 50%. The directors propose that C should be given up because the contribution in that case is the lowest.
Do you agree? What other non-cost considerations should be kept in mind before taking any decision in such a situation?
