1. The management Accounting outcome on 31^st/12/2017 of BAC limited were as follows:

Kshs kshs

Turnover (sh.50 per unit) 4,000,000

Less: raw materials 1,600,000

Direct Labour 640,000

Variable overhead 400,000

Fixed cost 600,000 3,240,000

Net profit 760,000

During 2017, the factory has been working at halfway its production capacity and the strategic manager has estimated that the quantity sold could be doubled in 2018 if the selling price was reduced to Kshs 40/=per unit. All other aspects of costs remained constant except that fixed cost increased by Kshs 100,000/=

Required:

Evaluate the viability of the strategic managers proposal of 2018 and justify your answer