he company operates at a margin of satety of 25%. Required: In order to improve the operations,|the following proposals have been put forward: (a) Increase the sales volume by 10\%. An advertisement expenditure of Rs 200,000 will be incurred. Fixed production overheads and selling and distribution overheads will increase by Rs 200,000 and Rs 95,000 respectively. What should be the selling price to achieve a total profit of Rs 2,500,000. (b) A reduction of selling price by 5% will increase the sales volume by 20%. The fixed production overheads will increase by Rs 300,000 and the fixed selling and distribution overheads by Rs 200,000 . An advertisement expenditure of Rs 300,000 will be required. Find the impact on profits. (c) Increase the selling price by 10% spending the Rs200,000 on advertisement. The production fixed overheads will increase by Rs200,000 and fixed selling and distribution overheads by Rs 100,000 . Find the increase in volume of sales required in units to earn 10% more profit than budgeted profit. (d) The company wish to apply for a government tender for 20,000 units. The existing sales will not be affected. Fixed production overheads will be increased by Rs 300,000 . A profit of Rs 100,000 on this order is expected. Find the lowest price to quote. he company operates at a margin of satety of 25%. Required: In order to improve the operations,|the following proposals have been put forward: (a) Increase the sales volume by 10\%. An advertisement expenditure of Rs 200,000 will be incurred. Fixed production overheads and selling and distribution overheads will increase by Rs 200,000 and Rs 95,000 respectively. What should be the selling price to achieve a total profit of Rs 2,500,000. (b) A reduction of selling price by 5% will increase the sales volume by 20%. The fixed production overheads will increase by Rs 300,000 and the fixed selling and distribution overheads by Rs 200,000 . An advertisement expenditure of Rs 300,000 will be required. Find the impact on profits. (c) Increase the selling price by 10% spending the Rs200,000 on advertisement. The production fixed overheads will increase by Rs200,000 and fixed selling and distribution overheads by Rs 100,000 . Find the increase in volume of sales required in units to earn 10% more profit than budgeted profit. (d) The company wish to apply for a government tender for 20,000 units. The existing sales will not be affected. Fixed production overheads will be increased by Rs 300,000 . A profit of Rs 100,000 on this order is expected. Find the lowest price to quote
