Vas Ltd. is engaged in the manufacture and sale of a consumer product. Its budget for the next year shows the following data:
|
Selling price/unit: |
20 |
|
Variable cost/unit: |
15 |
|
Fixed costs: |
Rs. 50,000 |
A research agency suggested that the firm shall increase its production and sale by 25% by reducing its selling price by 10%. However, the firm is working in its full capacity (and producing 20,000 units). In order to increase its production and sale, it has to expand its factory. The expansion would lead to an increase in the fixed by Rs. 25,000.
You are required to advise the firm regarding the expansion.