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Decision making techniques illustration 17. Evaluation of Strategy - Fixation of Price The Management Accountant of X itd., has prepared the following estimates of working results for the year ending 31st December, 2016 for the purpose of preparing the budgets for the year ending 31st December, 2017 Year ending 31/12/1986 Direct material 16.00 /unit Direct woges 40.00 Variable overheads 12.00 125.00 11 Sales Selling price Fixed expenses 6,75.000 p.a. 25,00,000p.a. During the year 2017. it is expected that the material prices and variable overheads will go up by 10% and 5 respectively . As a result of re-organisation of production methods the overall direct labour efficiency will increa by 12% but the wage rate will go up by 5%. The fixed overheads are also expected to increase by 31.25.000. TE technical director states that the same level of output as obtained in 1986 should be maintained in 1987 also a efforts should be made to maintain the same level of profit by suitably increasing the selling price. The market director states that the market will not absorb any increase in the selling price. On the other hand he proposes to publicity involving advertisement expenses in the proportions will increase the quantity of sales as under. Advertisement expenses ) 1,94,000 3,20,000 4,60,000 Additional units of sales 6,000 Required: 80,000 2,000 4,000 8,000 Present an income statement for the year 1986. ) Find the revised price and the percentage of increase in the price for 1987 if the Technical Directors' are accepted. 5) Evaluate the four alternative proposals put forth by the Marketing Director, determine the best output to be budgeted and prepare an overall income statement for 1987 at that level of output. blution