Alpha Co. Ltd manufactured and sold 1,000 iron boxes in the year ending 31 March 2010. The summarized trading and profi t and loss account is shown as follows:

For the year ending 31 March 2011 it is estimated that 1. Output and sales will be 1,500 iron boxes.
2. Prices of raw materials will rise by 25% on the previous year’s level.
3. Wages will rise by 20%.
4. Manufacturing cost will rise in proportion to the combined cost of materials and wages.
5. Selling cost per unit will remain unaffected.
6. Other expenses will remain unaffected by the rise in output.
You are required to submit a statement to the board of directors showing the price at which the iron box should be marketed so as to show a profi t of 20% on selling price.

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Rs. Rs. To cost of materials 1,00,000 By sales 5,00,000 To direct wages 1,50,000 To manufacturing expenses 80,000 To gross profit c/d 1,70,000 5,00,000 5,00,000 By gross profit b/d 1,70,000 To management and staff 80,000 salaries To rent, rates, insurance 15,000 To selling expenses 25,000 To general expenses 30,000 TO NET PROFIT 20,000 1,70,000 1,70,000