28. Three different types of goods are manufactuted and sold by Reliance Co. Ltd. These are P, Q and R respectively. P contributes 25% of its revenue to fixed costs and profit. Q contributes 20% and R contributes 40%. Selling price p.u. of these are as follows: P - 10 Q - 4 R - 6 The company earned a net profit of 20,000 before tax by selling 10,000 Units of P, 30,000 Units of Q and 15,000 units of R. The Sales Manager believes that the profit picture can be improved by eliminating Q and concentrating the sales efforts on P and R. He sees an opportunity to incrense the sales of P to 15.000 Units and that of R to 20,000 Units next year. Do you agree with the proposal of the Sales Manager? Prepare a Marginal Statement of Income using his assumptions. [Ans. Total Fixed Cost & 65,000; Profit when Q is discontinued 20,500. So proposal should be accepted.]

25% Q 20% R40% : Three different types of goods are manufactuted and sold by Reliance C0. Ltd. These are P,Q and R respectively. P contributes 25% of its revenue to fixed costs and profit. Q contributes 20% and R contributes 40%. Selling price p.u. of these are as follows : P 10,000 , Q 30,000 R 15,000 20,000 Q P R P 15,000 R 20,000 The company earned a net profit of 20,000 before tax by selling 10,000 Units of P,30,000 Units of Q and 15,000 units of R. The Sales Manager believes that the profit picture can be improved by eliminating Q and concentrating the sales efforts on P and R. He sees an opportunity to increase the sales of P to 15,000 Units and that of R to 20,000 Units next year. ? Do you agree with the proposal of the Sales Manager? Prepare a Marginal Statement of Income using his assumptions. [Ans. Total Fixed Cost 65,000; Profit when Q is discontinued 20,500. So proposal should be accepted.]