Explain what is meant by product mix analysis. What are the considerations to make product mix decisions.
b. Sanjay is the owner of SSR Pvt. Ltd. He needs to item ‘A’ for his business. He can buy the item at Rs. 50/- per piece. Alternatively, he can produce it in-house. His accountant produces an estimate of the costs of production for the item. Basis that he advises Sanjay not to produce the item in-house as it was costlier. Comment on whether the accountant is right or not. Support with analysis.
Direct Material Cost Rs. 20 per unit
Direct Labour Rs. 10 per unit
Power cost Rs. 5 per unit
Rent of factory allocated to Item A Rs. 18 per unit
Depreciation of Plant used for manufacturing A Rs. 6 per unit.
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