Ride-on makes and sells a mini-tractor lawn mower called the Luxon. The company is just about to start its new financial year for which the budget (recently approved by its holding company) shows the following:
............................................................. £000
Total capital employed..................... 4,000
Total sales revenue........................... 2,800
Total fixed costs.................................. 1,104
Net profit before tax.............................. 800
Return on capital employed (ROCE)....... 20%
Number of Luxons sold....................... 1,120
Its holding company requires it to achieve a ROCE of at least 20% and Ride-on’s directors are awarded annual bonuses if they succeed in this. Yesterday, Ride-on’s main competitor released details of a new product in direct competition to the mower. The Luxon has a selling price of £2,500 but its new rival has been priced approximately £300 below this. After a hastily convened meeting, Ride-on’s top managers have decided to reduce the Luxon’s price to £2,150 with immediate effect. They also feel that their forecast sales revenue now looks optimistic.

Tasks:
Advise them how they might maintain their forecast return on capital employed (ROCE) at 20% now that the Luxon’s price has been reduced:
a) if total sales revenue is maintained at £2.8 million; and
b) if total sales revenue decreases to £2.5 million.