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The following suggestions are under consideration:
(a) 10% reduction in price to yield an increase
in sales volume from 6600
to 7400 units.

Current unit price Rs. 1,000

Unit variable cost Rs. 500

Fixed cost Rs. 30,00,000

Prepare a statement comparing gross revenue, profit,
contribution and P/V ratio of the two alternatives with
present results. Which suggestion would you recommend?

Answers were Sorted based on User's Feedback

The following suggestions are under consideration: (a) 10% reduction in price to yield an increase..

Comparative Statement

Units cost Total

Sales 6600 1000 6600000
Less: V.cost 6600 500 3300000
Contribution 3300000
Less: F.cost 3000000
Profit 300000

P/V Ratio C/S*100 50

10%
Units Less Total
Cost
Sales 7400 900 6660000
Less: V.cost 7400 450 3330000
Contribution 3330000
Less: F.cost 3000000
Profit 330000

P/V Ratio 50

It is most recommanded to produce 7400 unit with 10% of
reduction of cost to yield a profit of 330000.

IS this correct or not, IF not please produce the right one

Thanks

Syed.

 Is This Answer Correct ? 5 Yes 3 No

The following suggestions are under consideration: (a) 10% reduction in price to yield an increase..

The price is reduced by 10% but V.cost remains the same.hence it will be first one which is suitable

 Is This Answer Correct ? 0 Yes 0 No

The following suggestions are under consideration: (a) 10% reduction in price to yield an increase..

Comparative Statement

Units Price/
unit Total

Sales 6600 1000 6600000
Less: V.cost 6600 500 3300000
Contribution 3300000
Less: F.cost 3000000
Profit 300000

P/V Ratio C/S*100 50

Units Price/
unit Total
Sales 7400 900* 6660000
Less: V.cost 7400 450 3330000
Contribution 3330000
Less: F.cost 3000000
Profit 330000

P/V Ratio 50%

It is most recommanded to produce 7400 unit with 10% of
reduction of sale price per unit as it has resulted in an
increase of net profit of 30000.

*Means revised sales price /unit
Sale/unit = 1000
Redection in yield to price as a result of increase in
volume = 10%
Hence revised sales price /unit = 1000 x (100-10)% = 900

 Is This Answer Correct ? 0 Yes 1 No

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