the sales manager on the other hand suggests to increase the selling price by 10 whi 608747

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XYZ Ltd has drawn up the following budget for the year 2009–10:


Raw materials Don't use plagiarized sources. Get Your Custom Essay on the sales manager on the other hand suggests to increase the selling price by 10 whi 608747 Get an essay WRITTEN FOR YOU, Plagiarism free, and by an EXPERT! Just from $10/Page Order Essay	40,000
Labour and other variable costs	12,000
Fixed manufacturing overheads	14,000
Packing & Variable distribution cost	8,000
Fixed overheads including selling	6,000
	80,000
Sales revenue @ 10 per unit	1,00,000
Budgeted profit	20,000

The General Manager suggests to reduce the selling price by 5% and expects to achieve an additional volume of 5%. A more-intensive manufacturing programme will involve additional costs of Rs. 5,000 for production planning. It will also be necessary to open an additional sales office at the cost of Rs. 10,000 per annum.
The Sales Manager, on the other hand, suggests to increase the selling price by 10% which is estimated to reduce the sales volume by 10%. At the same time, saving in manufacturing overheads and general overheads of Rs. 5,000 and Rs. 10,000, per annum, respectively, is expected on this reduced volume. Which of these two proposals would you accept and why? Show the complete working.

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