2. When Alamin Ltd. operates at normal capacity, it manufactures 200,000 units of its product per year. The unit cost of

[answerhappygod]

2 When Alamin Ltd Operates At Normal Capacity It Manufactures 200 000 Units Of Its Product Per Year The Unit Cost Of 1 (65.25 KiB) Viewed 136 times

2. When Alamin Ltd. operates at normal capacity, it manufactures 200,000 units of its product per year. The unit cost of manufacturing at normal capacity is as follows; Direct materials Direct labour Variable overheads Fixed overheads Production cost (per unit) Selling price Sh.7.80 2.10 2.50 4.00 16.40 21.00 During the next three months, only 10,000 units can be produced and sold. The management plans to shut down the plant, estimating that the fixed manufacturing overheads can be reduced to Sh.74,000 for the quarter when the plant is not operating. The fixed overhead costs are incurred at a uniform rate thought the year. Additional costs of plant shut down for the three months are estimated at Sh.14,000. Required: a) Should the plant be shut down for three months? Show computations b) What is the shutdown point for the three months in units of products?