XYZ Ltd. makes a special gadget for the car it manufactures. The machine for the gadget works to full capacity and incurs Rs. 15 Lakhs and Rs. 40 Lakhs respectively as Variable and Fixed Costs. If all the gadgets were purchased from an outside supplier, the machine could be used to produce other items, which would earn a total contribution of Rs. 25 Lakhs. What is the maximum price that XYZ Ltd. should be willing to pay to the outside supplier for the gadgets, assuming there is no change in Fixed Costs?

Syllabus of the this paper:

Section A : Cost & Management Accounting 50%
1. Cost and Management Accounting - Introduction
2. Decision Making Tools
3. Budgeting and Budgetary Control
4. Standard Costing and Variance Analysis
5. Learning Curve

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