New Green Ltd. manufactures and markets quality tea in domestic market. The following data are...
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Accounting
New Green Ltd. manufactures and markets quality tea in domestic market. The following data are available; Per Kg.
Sh.
Raw materials 16
Convention cost (variable) 12
Dealers Margin (10% of sales) 4
Selling price 40
Fixed costs 500,000
Present sales 90,000 Kg.
Capacity utilization 60%
There is acute competition. Extra efforts are necessary to sell. Suggestions have been made for increasing the sales;
By reducing sales price by 5%
By increasing dealers margin by 25% of the existing rate
Required: Advice the management on which of the above two suggestions would you advise, if the company desires to maintain the present profit
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