RB Ltd manufactures and markets a single consumer product. The following information is available:
|
Materials |
10 |
|
Conversion costs (variable) |
7 |
|
Dealer’s margin |
3 |
|
Selling price |
30 |
|
Fixed cost |
Rs. 4,00,000 |
|
Present sale |
75,000 units |
|
Capacity utilization |
60% |
There is severe competition and extra efforts are needed to sell. Suggestions have been made for increasing sales:
- By reducing sales price by 10%.
- By increasing dealers’ margin by 25% over the existing rate.