S.M. Ltd. produces two products, A and B. The budget for these products [at 60% level of activity] for the year 2008-09 gives the following information.
|
Particulars |
Product A |
Product B |
|
Raw Material Per Unit |
Rs.7.50 |
Rs.3.50 |
|
Direct Labor Per Unit |
Rs.4.00 |
Rs.3.00 |
|
Variable Overheads Per Unit |
Rs.2.00 |
Rs.1.50 |
|
Fixed Overheads Per Unit |
Rs.6.00 |
Rs.4.50 |
|
Selling Price Per Unit |
Rs.20.00 |
Rs.15.00 |
|
Production and Sales [Units] |
4,000 |
6,000 |
The Managing Director, not being satisfied, with the projected results presented above, referred the budget to the Marketing Director for his observations regarding performance improvement. The Marketing Director suggested that the sales [ in quantity] of both the products A and B could be increased by 50% provided the selling price were reduced by 5% and 10% for the products A and B respectively. The price reduction should be made applicable to the entire sales [in quantity] of both the products A and B. You are required to prepare a statement of overall profitability on the basis of original budget and the revised budget.