1. During the month of September 2015, a company produced and sold 20,000 units of a product. The cost details were as indicated:

Sh.

Sales 4,000,000

Variable cost 3,000,000

Fixed cost 800,000

It expected that the cost relationship will hold in October, 2015.The company would want to increase their sales. In order to do so, the company has proposed the following options:

1. Reduce the selling price by 20%
2. Increase variable cost by shs.30 per unit to improve product quality
3. Spend an amount of shs. 3000,000 on advertisement
4. Increase fixed cost by shs450,000 to improve production efficiently