The company Cooling Limited manufactured and sold 1,000 refrigerators in the year ending on 31 December 1997. The summarized trading, profit and loss account is as follows:
|
Particulars |
Rs |
|
Rs |
|
|
To cost of materials |
80,000 |
By sales |
400000 |
|
|
To Direct wages |
120,000 |
|||
|
To other manufacturing cost |
50,000 |
|||
|
To gross profit(c/d) |
150,000 |
|||
|
400,000 |
400,000 |
|||
|
To management salaries |
60,000 |
By gross profit(b/d) |
150,000 |
|
|
To rent rate |
10,000 |
|||
|
To Selling expenses |
30,000 |
|||
|
To general expenses |
20,000 |
|||
|
To net profit |
30,000 |
|||
|
150,000 |
150,000 |
For the year ending on 31 December 1998, it was estimated that
- Output and sales would be 1,200 refrigerators.
- Prices of materials would go up by 20% on the level of the previous year.
- Wages would increase by 5%.
- Manufacturing cost would rise in proportion to the combined cost of materials and wages.
- Selling costs per unit would remain unchanged.
- Other expenses would also remain constant.
You are required to submit a statement to the board of directors showing the price at which the refrigerators should be sold so as to show a profit of 10% on selling price.