Two firms A & Co. and B & Co. sell the same type of product in the same market. Their budgeted Profit & Loss account (Profit & Loss A/c) for the year that ends on 31 March 1996 is as follows:
|
A &Co. |
B &Co. |
||||
|
Sales |
5,00,000 |
6,00,000 |
|||
|
Less: |
Variable cost |
4,00,000 |
4,00,000 |
||
|
Fixed cost |
30,000 |
70.000 |
|||
|
4 30 000 |
4 70 000 |
||||
|
Net profit |
70,000 |
1,30,000 |
|||
Required:
- Calculate at which sales both the firms will earn an equal profit.
- State which firm is likely to earn greater profit in condition of:
- Heavy demand for the product.
- Low demand for the product.