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Illustration 1945 Gouresen Company Private Limited, manufacturing Bimjal pressure cookers has drawn up the following budget for the year 1979-80 : Rs. Raw materials 20,00,000

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Illustration 1945 Gouresen Company Private Limited, manufacturing "Bimjal" pressure cookers has drawn up the following budget for the year 1979-80 : Rs. Raw materials 20,00,000 Labour, stores, power and other variable costs 6,00,000 Manufacturing overheads 7,00.000 Packing and variable distribution costs 4,00,000 General overheads including selling 3,00,000 40,00,000 Income from sales 50,00,000 Budgeted profit 10,00,000 The General Sales Manager suggests to reduce selling prices by 5% and expects to achieve an additional volume of 50%. There is sufficient manufacturing capacity. More intensive manufacturing programme will involve additional costs of Rs. 50,000 for production planning. It will also be necessary to open an additional sales office at the cost of Rs. 1,00,000 per annum. The Sales Manager, 'on the other hand, suggests to increase selling price by 10%, which it is estimated will reduce sales volume by 10% and at the same time savings in manufacturing overheads and general overheads at Rs. 50,000 and Rs. 1,00,000 per annum respectively is expected on this reduced volume. Which of these two proposals would you accept and why

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