XYX Limited manufactures three different products and the following information has been collected from the books of accounts: Products A B C Total…

Evaluation of Change over to Product P from Product C Existing Production Products A B C Total Selling Price (₹) 30 40 20 Less: Variable Cost (₹) 15 20 12 Contribution per unit (₹) 15 20 8 P/V Ratio 50% 50% 40% Sales Mix 35% 35% 30% Contribution per rupee of sales (P/V Ratio x Sales Mix) 17.5% 17.5% 12% 47% Present Total Contribution (₹6,00,000 × 47%) ₹2,82,000 Less: Fixed Costs ₹1,80,000 Present Profit ₹1,02,000 Present Break-Even Sales (₹1,80,000/0.47) ₹3,82,979 Proposed Production Products A B C Total Selling Price (₹) 30 40 30 Less: Variable Cost (₹) 15 20 15 Contribution per unit (₹) 15 20 15 P/V Ratio 50% 50% 50% Sales Mix 50% 25% 25% Contribution per rupee of sales (P/V Ratio x Sales Mix) 25% 12.5% 12.5% 50% Proposed Total Contribution (₹6,40,000 x 50%) ₹3,20,000 Less: Fixed Costs ₹1,80,000 Proposed Profit ₹1,40,000 Proposed Break Even Sales (₹1,80,000/0.50) ₹3,60,000 Advice: The company should change over to the production of Product P. The proposed production plan yields a higher profit of ₹1,40,000 compared to the existing profit of ₹1,02,000. Additionally, the break-even sales are lower in the proposed plan (₹3,60,000) compared to the existing plan (₹3,82,979), indicating reduced risk.