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Rubber factory planning its advertising campaign for 2005-06 and has prepared the following budget data base on a zero advertising expenditure: Normal plant capacity :
Rubber factory planning its advertising campaign for 2005-06 and has prepared the following budget data base on a zero advertising expenditure:
Normal plant capacity : | 2,00,000 units | |||
Sales : | 1,50,000 units | |||
Variable manufacturing costs : | Rs.15.00 per unit | |||
Selling price : | Rs.25.00 per unit | |||
Fixed costs: | ||||
Manufacturing : | Rs.8,00,000 | |||
Selling and administrative : | Rs.7,00,000 |
a. An advertising agency claims that an aggressive advertising campaign would enable the company to increase its unit sales by 20%. What is the maximum amount that Bharat can pay for advertising and obtain an operating profit of Rs.2,00,000?
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