MintCraft Pvt. Ltd. specializes in producing custom-designed award medallions and corporate commemorative coins. The company operates at a monthly…

CA Intermediate · Cost and Management Accounting · MTP · May 2026
MintCraft Pvt. Ltd. specializes in producing custom-designed award medallions and corporate commemorative coins. The company operates at a monthly production capacity of 12,000 medallions, currently producing and selling 9,000 medallions per month in the domestic market at a price of 180 per unit. The cost data for the month of March, 2025 is as under: Cost Elements Amount (₹) Variable Costs (dependent on units produced) Direct Materials (for 9,000 units) 3,42,000 Direct Labour 3,96,000 Variable Batch Costs (180 batches x 550 per batch) 99,000 Fixed Costs Fixed Manufacturing Overhead 3,20,000 Fixed Marketing and Admin 2,10,000 The batch size for MintCraft Pvt. Ltd.'s regular production is 50 medallions per batch. However, the special order received from an international client involves the production of 3,000 medallions, which differs in batch configuration. For this special order, the company is required to manufacture the medallions in 30 batches, with each batch consisting of 100 medallions. The client has offered a price of 125 per medallion for this one-time order. Required: (i) SHOULD MintCraft Pvt. Ltd. accept the special order? Support your recommendation with relevant calculations and brief justification. (ii) Assume the plant capacity is reduced to 10,000 units due to scheduled maintenance. The special order must be accepted in full or not at all. SHOULD MintCraft accept the special order under these new conditions? PROVIDE brief reasoning supported by contribution margin analysis.

Suggested Answer and Working Notes:

(i) Statement of Contribution Margin on Accepting the Special Order of 3,000 Medallions Particulars ₹ Sales Revenue (3,000 medallions x 125 per medallion) 3,75,000 Less: Variable Costs Direct Materials (3,000 medallions x 38 per medallion*) 1,14,000 Direct Labour (3,000 medallions x 44 per medallion*) 1,32,000 Setups, Quality Control, Handling (30 batches x 550 per batch) 16,500 Contribution Margin 1,12,500 *Rates derived from regular cost data: Direct Materials = 3,42,000 / 9,000 units = 38/unit Direct Labour = 3,96,000 / 9,000 units = 44/unit Decision - When Capacity Is 12,000 Medallions: The plant has 3,000 units of unused capacity (12,000 – 9,000), and the special order fits within this limit. Since fixed costs will not increase and the order provides a positive contribution margin of 1,12,500, MintCraft Pvt. Ltd. should accept the special order, as it will increase operating profit. (ii) Statement of Contribution Margin Loss Due to Capacity Constraint (When Capacity = 10,000 Medallions): Particulars ₹ Gain in Contribution Margin from Special Order 1,12,500 Less: Loss of Contribution Margin on 2,000 Medallions of Regular Sales (W.N.1 & W.N.2) (1,74,000) Net Loss in Contribution Margin (61,500) Decision - When Capacity Is 10,000 Medallions: Accepting the special order means MintCraft must reduce 2,000 medallions from its regular, higher-priced domestic sales. The loss in contribution from regular sales exceeds the gain from the special order, resulting in a net contribution loss of 61,500. Therefore, the special order should not be accepted under capacity constraint. Working Notes: W.N. 1: Contribution Margin on Current 9,000 Medallions Particulars ₹ Sales Revenue (9,000 x 180) 16,20,000 Less: Variable Costs Direct Materials (9,000 x 38) 3,42,000 Direct Labour (9,000 x 44) 3,96,000 Setup, Handling, QC (180 batches x 550) 99,000 Contribution Margin 7,83,000 W.N. 2: Contribution Margin on 7,000 Medallions (after reducing 2,000 units) Particulars ₹ Sales Revenue (7,000 x 180) 12,60,000 Less: Variable Costs Direct Materials (7,000 x 38) 2,66,000 Direct Labour (7,000 x 44) 3,08,000 Setup, Handling, QC (140 batches x 550) 77,000 Contribution Margin 6,09,000 Loss of Contribution Margin = 7,83,000 - 6,09,000 = 1,74,000

Topics: Marginal Costing

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