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Example 6.15: AB Ltd. manufactures three products X, Y, and Z. Standard selling process and costs have been established for 2003 as follows: X Y Z Selling price per unit Rs. 28 Rs. 60 Rs. 125 Direct materials per unit Direct wages per unit 10 20 50 Variable overheads per unit 5 10 25 8 15 20 t34 Direct wages are paid at the rate of Rs. 2 per hour in each case. Fixed overheads are budgeted at Rs. 25,000 for the coming year.. In the short run, the company cannot increase its direct labour strength and as a result, only 35,000 direct labour hours will be available in the coming year. The company has commitments to produce 500 units of each product. It has been suggested that after meeting the minimum requirements for X, Y and Z, the balance of available direct labour hours should be used to produce product Z. You are required: A) To prepare an income statement showing the expected results if the proposal is adopted. B) Comment on the statement you have produced in (a) and prepare an income statement for any alternative policy, which you consider would be more profitable. C) Basing your calculations on your suggestion in (b), show the company's break- even point in terms of units and sales value. D) Show the sale value which is required to produce an after tax return of 10% on capital employed of Rs. 1,00,000 assuming tax rate of 50%

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