The company is keen to improve its budgeted profit through increased sales in the coming

period and is considering the following alternative sales strategies:

Strategy I

Reduce selling price by $10\%$ in order to increase the total budgeted sales units by $25\%.$ In

addition,

an advertising campaign costing N$$7500$ will further increase the original budgeted sales

units by $8\%.$

Strategy II

Offer a $20\%$ selling price discount to a single major customer who is prepared to buy $35000$

units.

This will result in a $90\%$ reduction in the fixed distribution costs per period.

If either of the sales strategies is adopted, variable costs of production will increase by

N$$0\mathrm{.}30$ per unit produced above $28000$ units.

Required

Marks

Subtotal

Tota

l

$1\mathrm{.}2$ Calculate the revised budgeted profit under Strategy I and Strategy

II$.1212$

$1\mathrm{.}3$

Recommend which sales strategy the company should adopt giving

reasons for your advice.