Question:
A company which recently launched a new product reviewed the operational performance after six months. The profit statements relating to last two quarters are as follows:
|
Quarter I Rs.
|
Quarter II Rs.
|
|
No. of units sold
|
10,000 units
|
15,000 units
|
|
Selling price per units
|
12
|
12
|
|
Direct materials
|
25,000
|
40,000
|
|
Direct wages
|
25,000
|
35,000
|
|
Production overheads
|
35,000
|
40,000
|
|
Total
|
85,000
|
1,15,000
|
|
Gross profit
|
35,000
|
65,000
|
|
Selling ! administrative overheads
|
40,000
|
45,000
|
|
Net profit/loss
|
(5,000)
|
20,000
|
Required:
1. Calculate the BEP in units and the sales value for a quarter.
2. If the company supplies 5,000 units over and above the sales of the second quarter to a special customer (which sales will not affect the regular market), what selling price should be quoted to earn a profit of Rs. 3,000 after meeting the special expenses of Rs. 2,000?
3. If the selling commission is increased by 10% on sales, what quarterly unit sales will be required to earn a return of 15% on the investment of Rs. 1,00,000 in this line of product?
4. If in the third quarter, the company reduces the selling price by Re 1 and increases the advertisement expenses by Rs. 10,000, the sales volume will increase by 20% over that of the second quarter. Should this plan be implemented?