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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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