if in the third quarter the company reduces the selling price by re 1 and increases 608781
A company which recently launched a new product reviewed the operational performance after six months. The profit statements relating to last two quarters are as follows:
|
Quarter I Rs. |
Quarter II Rs. |
|
|
No. of units sold |
10,000 units |
15,000 units |
|
Selling price per units |
12 |
12 |
|
Direct materials |
25,000 |
40,000 |
|
Direct wages |
25,000 |
35,000 |
|
Production overheads |
35,000 |
40,000 |
|
Total |
85,000 |
1,15,000 |
|
Gross profit |
35,000 |
65,000 |
|
Selling ! administrative overheads |
40,000 |
45,000 |
|
Net profit/loss |
(5,000) |
20,000 |
Required:
- Calculate the BEP in units and the sales value for a quarter.
- If the company supplies 5,000 units over and above the sales of the second quarter to a special customer (which sales will not affect the regular market), what selling price should be quoted to earn a profit of Rs. 3,000 after meeting the special expenses of Rs. 2,000?
- If the selling commission is increased by 10% on sales, what quarterly unit sales will be required to earn a return of 15% on the investment of Rs. 1,00,000 in this line of product?
- If in the third quarter, the company reduces the selling price by Re 1 and increases the advertisement expenses by Rs. 10,000, the sales volume will increase by 20% over that of the second quarter. Should this plan be implemented?