p17 Profit = Y X 75/100 = 0.75Y New Equation 1.125X +0.75Y = 3.000 (2) Multiplying Eq. (1) by 0.75 0,75X +0.75Y = 2,250 0.375X = 750 X = 750/0.375 = ? 2,000 Y = 3.000 - 2.000 = ? 1,000 Statement of cost & profit per unit at present Material = 2,000 x 50% Labour = 2,000 x 20% Overheads = 2,000 x 30% 1,000 400 600 2,000 1,000 3,000 (+) profit @ 50% of cost Computation of new selling price to get same percentage of profit (R) Material = 1,000 x 117/100 1,170 Labour = 400 x 120/100 480 Overheads 600 Cost 2,250 (+) Profit @ 50% 1,125 New selling price 3,375 Problem 18 An umbrella manufacturer marks an average net profit of 2.50 per piece on a selling price of 14.30 by producing and selling 6,000 pieces or 60% of the capa city. His cost of sales is Direct material 3.50 Direct wages 1.25 Works overheads (50% fixed) 6.25 Sales overheads (25% variable) 0.80 During the current year, he intends to produce the same number but anticipates that fixed charges will go up by 10% which direct labour rate and material will increase by 8% and 6% respectively but he has no option of increasing the selling price. Under this situation, he obtains an offer for further 20% of the capacity. What minimum price you will recommend for acceptance to ensure the manufacturer an overall profit of 16,730