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j76 600 40 20 8700 114 814 Selling price 1,000 Less: variable making cost Sales commission Designer's fees 340 The firm's income would be less

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j76 600 40 20 8700 114 814 Selling price 1,000 Less: variable making cost Sales commission Designer's fees 340 The firm's income would be less by 22,85,000. The sales manager should not accept this offer. (iii) Computation of the lowest price Sales price (offered) Add additional contribution required to be earned so that profit level is maintained 22,85,000 from 2,500 units to be sold: increase in sales price per shirt is (R2,85,000 + 2,500) The lowest price for accepting the offer of 2,500 shirts P.23.4 Sound Well Music Company Ltd (SMC) manufactures cassette record players. It is operating at full capacity of 10,000 units annually with a sales price of $3,000 per unit. The cost data are: (1) Raw materials, 2900 per unit, (ii) Direct labour, 1400 per unit, (iii) Variable overheads, 3300 per unit, and (iv) Fixed cost, 760,00,000 While the SMC was planning to expand its operations, Audiocon Ltd launched a new competitive product: HiFi CD player at 33,500 per unit. To meet the competition from this new product, the SMC has under consideration two alternatives: (1) Reduce the price of the cassette player to $2,499 (II) Add new features to the product by further processing and sell for 33,700. The further processing of the product would involve the following Raw materials cost, 600 per unit; Labour charges. 300 per unit: Additional variable overheads, 300 per unit; and Additional fixed costs, 340,00.000 As a consultant, what course of action would you recommend the SMC to follow

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