The Sindh Engineering Company produces a bicycle which sells at Rs.1,000 per unit. At 80% capacity utilization which is the normal level of activity, the sales are Rs.180 million. Costs are as under:

Prime cost per unit Rs.400

Factory indirect cost Rs.30 million (including variable cost Rs.10million)

Selling costs Rs.25 million (including variable cost Rs.15million)

Distribution costs Rs.20 million (including variable cost Rs.11million)

Administration costs Rs.6 million

Commission and discounts are 5% of sales value.

Required:

1. Calculate the break-even sales value.
2. Prepare statements showing sales, costs, profit and contribution margin at each of the following levels:
   1. at the normal level of activity;
   2. if unit selling price is reduced by 5% thereby increasing sales and production volume by 10% of the normal activity level;
   3. if unit selling price is reduced by 10% thereby increasing sales and production volume by 20% of the normal activity level.

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