Question
A company has been facing stiff competition lately and is now considering cutting down on its selling price but cannot reduce any cost. The current
A company has been facing stiff competition lately and is now considering cutting down on its selling price but cannot reduce any cost. The current Selling Price is Rs. 500 per unit, whereas the total variable cost is Rs. 225 per unit. The companys annual fixed cost is Rs. 110,000. The companys budgeted sales unit are 500 which is the maximum level of sales it can achieve. The company is now considering reducing the price by Rs. 50 per unit. If the company goes ahead with this decision, compare how its margin of safety be affected compared to the previous level? *
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