The Board of Directors is dissatisfied with this budget, and asks a working party to come up with an alternate budget with a higher profit figures. The working party reports back with the following suggestions, which will lead to a budgeted profit of Rs. 25,000. The company should spend Rs. 28,500 on advertising, and put the sales price up to Rs. 32 per unit. It is expected that sales volume would also rise, despite the price increase, to 12,000 units. To achieve the extra production capacity, however, the work force must be able to reduce the time taken to make each unit of the product. It is proposed to offer a pay and productivity deal, in which the wage rate per hour is increase to Rs. 4. The hourly rate for variable overhead will be unaffected. [7] Prepare a revised budget giving effect to the above suggestions. Q.3 Answer the following: I. Babloo Toys, manufactures and sells 15,000 units of Teddy Bear toy (TB), in 2005. The full cost per unit is Rs. 200. Babloo Toys earns a 20 % return on an investment of Rs. 18,00,000 in 2005 Required: (1) Calculate the selling price and the markup percentage on the full cost per unit of TB toy in 2005. (2) If the selling price in requirement 1 represents a markup percentage of 40 % on variable cost per unit, calculate the variable cost per unit of TB toy in 2005. (3) Calculate Babloo Toys's operating income if it had increased the selling price to Rs. 230. At this price Babloo Toys would have sold 13,500 units of TB toy. Assume no Should Babloo Toys increase the selling price of TB toy to Rs 230? (4) In response to competitive pressures, Babloo Toys must reduce the price of TB toy to Rs 210 in 2006, in order to achieve sales of 15,000 units. Babloo Toys plans to reduce its investment to Rs 1,650,000. If Babloo Toys wants to maintain a 20 % return on investment, what is the target cost per unit in 2006? change in total fixed costs