Question

A small courier firm, Anand Courier delivereds small packages within the same
cities. It operate from the rented office and employees ten staff for delivery, sorting
and administrative work. The firm has found that even if it keeps the price it charges
for delivery the same, it will be able to deliver more packages than before because of
the rapidly growing demand for courier services in the city and due to fact that there
are few firm offering such services. However, if it lowers the price it will gain to some
extent in terms of volume sales. It is considering expanding its fixed capital in order
to take advantage of the growing market.
Currently, the firm’s fixed costs are Rs. 60,000 per month and its variable costs
are Rs. 5 per package deliver. It charges Rs. 20 per package and has a monthly volume
of 8000 packages. If it expands, its fixed costs will increase by another Rs. 20,000 per
month. With the new fixed cost of rs. 80,000 a months, it is considering the following
two options :
(i) If it is maintain the same price of Rs. 20 per package it expects to deliver 10000
packages per month after axpansion. The variable cost will reduce to rs. 4 per
package.
(ii) If it lower the price to Rs. 15 per package it expects to deliver 12000 packages
per month and its variable cost will come down to Rs. 3.50 per package.

Answer 1

Answer:

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