Case 1 Cost-Volume-Profit (CVP) analysis + marginal analysis You are the manager in Bright company that produces paper...

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Accounting

Case 1Cost-Volume-Profit (CVP) analysis + marginalanalysis
You are the manager in Bright company that produces paper bagsfor food shops and supermarkets. You are provided with followinginformation:
Bright company is able to produce 60,000 packs of bags.
Its current sale volume is 50,000 packs of bags per year. Thishas achieved its maximum sale force.
Current selling price is $10 per pack of bags.
Variable costs in total are $200,000;
Fixed costs are $ 125,000.
A newly established shop has approached you, informing awillingness of purchasing 5,000 packs of bags per year at a priceof $6 for each bag. If this proposal is accepted, unit variablecosts would remain the same however fixed costs would increase by$6,000 per year.
Required:
Discuss whether this proposal is worthwhile from a financialpoint of view.
Analyze, if your competitor in the paper industry knows theabove cost and price information, what action(s) may the competitortake to beat you in the market.

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proposal of newly established shop Particulars units 1 per unit 2 total12 sales 5000 6 30000 less variable cost 5000 420000050000 20000 contribution 5000 2 10000 less fixed cost 5000 1260005000 6000as See Answer

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