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2 . B An Indian soft drink company is planning to establish a subsidiary company in Bhutan to produce mineral water. Based on the estimated

2.B An Indian soft drink company is planning to establish a subsidiary company in Bhutan to
produce mineral water. Based on the estimated annual sales of 40,000 bottles of the mineral
water, cost studies produced the following estimates for the Bhutanese subsidiary:
commission of 8% of the sale price. No portion of the Indian office expenses is to be allocated to
the Bhutanese subsidiary. You are required to:
I. Compute the sale price per bottle to enable the management to realize an estimated 10% profit
on sale proceeds in Bhutan.
II. Calculate the break-even point in rupee sales as also in number of bottles for the Bhutanese
subsidiary on the assumption that the sale price is Rs.14 per bottle.
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