International Brands Ltd. Is operating at 60% capacity and producing 2,700 pieces of product A. The cost of production for the month of August 2012…

International Brands Ltd. Is operating at 60% capacity and producing 2,700 pieces of product A. The cost of production for the month of August 2012 was:

                                                                       Rs.

Direct Material                                              54,000

 Direct wages                                                  8,100

Variable Overheads                                        9,900

Fixed Overheads                                            18,000

The products are currently sold at an average price of Rs. 72.

A tender for supply of 900 pieces per month has been received. To submit tender the following information has been ascertained.

•          Variable Overheads attributable to various activity level is:

           %                                                              Per month Rs.  

           50                                                                   8,280

           60                                                                   9,900

           70                                                                   11,520

           80                                                                   13,500

           90                                                                   15,300

           100                                                                 16,920

Required:                                                                                                             

(a)       Calculate the bidding price which will yield a 10% profit.

(b)       statement showing the effect on the monthly profit if the company’s tender is  accepted.