A Company manufactures a single product with a capacity of 150,000 units per annum. The summarized income statement for the year ending 30th June 2016 is as follows:

Revenue: 100,000 units @TZS 15,000 perunit-----------------1,500,000,000

Less: Cost of Sales :

Direct Materials 300,000,000

Direct Labour 200,000,000

Production overhead:

Variable 60,000,000

Fixed 300,000,000

Administration Overhead (Fixed) 150,000,000

Selling and Distribution Overheads:

Variable 90,000,000

Fixed 150,000,000 ----------------1,250,000,000

Profit 250,000,000

You are required to evaluate the following options:

1.What will be the amount of sales required to earn a target profit of 25% on sales, if the packing is improved at a cost of TZS 1,000 per unit?

2.There is an offer from a large retailer for purchasing 30,000 units per annum, subject to providing a packing with a different brand name at a cost of TZS 2,000 per unit.

However, in this case there will be no selling and distribution expenses. Also this will not, in any way, affect the company's existing business.What will be the break-even price for this additional offer?

3.If an expenditure of TZS. 300,000,000 is made on advertising, the sales would increase from the present level of 100,000 units to 120,000 units at a price of TZS. 18,000 per unit, will that expenditure be justified?

4.If the selling price is reduced by TZS. 2,000 per unit, there will be 100% capacity utilization. Will the reduction in selling price be justified?