ABC Ltd manufactures and sells sole products for Rs. 50 per unit and has a variable cost per unit of Rs. 20. The accounts of the company for the year 2009 are expected to reveal a profit of Rs. 7,00,000 after charging fixed costs of Rs. 5,00,000.
Market-sensitivity tests suggest the following responses to price charges:
|
Alternatives |
Selling price reduced by |
Quantity sold increased by |
|
A |
5% |
10% |
|
B |
7% |
20% |
|
C |
10% |
25% |
Evaluate these alternatives and state which alternative, on to be profitability consideration, should be adopted for the forthcoming year, assuming the cost structure to be unchanged from 2009.