Question
The profit for the year of Push On Ltd. work out to 12.5% of the capital employed and the relevant figures are as under: Amount
The profit for the year of Push On Ltd. work out to 12.5% of the capital employed and the relevant figures are as under: Amount (`) Sales 5,00,000 Direct Material 2,50,000 Direct labor 1,00,000 Variable overheads 40,000 Capital employed 4,00,000 The new sales manager who has joined the company recently estimates for the next year a profit of about 23% on the capital employed provided the volume of sales is increased by 10% and simultaneously there is an increase in Selling Price of 4% and an overall cost reduction in all the elements of cost by 2%. Find out by computing in detail the cost and profit for next year, whether the proposal of sales manager can be adopted. (b) Details about the single product marketed by a company are as under Per Unit Amount (`) Selling Price 100, Direct Material 60, Direct Labor, 10 Variable Overheads 10. No. of units sold in the year 5,035. Pursuant to an agreement reached with the Employees union, there would be next year a 10% increase in wages across the board for all those directly engaged in production. Work out: (i) How many more units have to be sold next year to maintain the same quantum of profit? (ii) Or else, by what percentage the Selling Price has to be raised to maintain the same P/V ratio.
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