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Additional information It another factory the company manutadures bookcases. The following infomation is available. ...

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Accounting

Additional information
It another factory the company manutadures bookcases. The following infomation is available.
Selling price per unit $55
Materials per unit ,$10
Dired labour per unit ,$21
Fixed costs per month ,$54000
Factory capacity per m onth 3800 units
Recently demand for the product has fallen due to increased competition and the target pro fit of
$12500 per m onth has not been met.
The directors are considering the following options.
Option A:
1 Reduce the selling price of each bookcase by $3 per unit.
2 Introduce a sales commission of 5% of the selling price.
3 It is expeded that demand will be 3800 units.
Option B:
4 Change the design to im prove quality resulting in an increase of 20% in the material cost per
unit.
5 Labour hours per unit will increase by 10%.
6 The revised selling price of each bookcase will be $59.
7 Start an advertising campaign at a cost of $24000 per annum.
8 It is expeded that demand will be 3040 units.
RE QUIRED
(e) Calculate the forecast pro fit per month for:
(i) Option A (6 marks)
(ii) Option B(6 marks)
(f) Recomm end which option the diredors should choose. Justify your ansmer. (4 marks)
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