Eg 4 A company is working at 60% of potential capacity. The Sales Manager has reported two available solutions for increasing sales : (a) By an overseas contract which calls for delivery, spread equally for a period of three years totaling Rs.15,00,000 (b) Local sales can be increased by 50 per cent if Rs.50,000 is spent on special advertising. The following is a summarised analysis of the profit and loss account for the previous year : Rs. lakhs Materials used 4.50 Direct labour 5.10 Manufacturing expenses : Fixed 1.75 Variable 0.75 Selling expenses Variable 1.50 Administration expenses : Fixed 1.00 ------------ 14.60 Profit 0.40 ----------- Sales 15.00 It is estimated that additional selling expenses on export sales will be 5 per cent of sales value. Decide whether the directors would adopt (a) or (b) or a feasible combination of (a) and (b).

Eg 4 A company is working at 60% of potential capacity. The Sales Manager has reported two available solutions for increasing sales : (a) By an overseas contract which calls for delivery, spread equally for a period of three years totaling Rs.15,00,000 (b) Local sales can be increased by 50 per cent if Rs.50,000 is spent on special advertising. The following is a summarised analysis of the profit and loss account for the previous year : Rs. lakhs Materials used 4.50 Direct labour 5.10 Manufacturing expenses : Fixed 1.75 Variable 0.75 Selling expenses Variable 1.50 Administration expenses : Fixed 1.00 14.60 Profit 0.40 Sales 15.00 It is estimated that additional selling expenses on export sales will be 5 per cent of sales value. Decide whether the directors would adopt (a) or (b) or a feasible combination of (a) and (b)