The budgeted per unit cost data of a toy manufacturing company is: Material- Rs 18; Labour- Rs 9; Variable cost- Rs 8; Selling price- Rs 50. The budgeted production and sales is 1,50,000 units. Fixed overhead incurred is Rs 4,00,000. The total profit if price is decreased by 25% and volume of sales increase by 30% is:
Answers
Answer:
The total profit if the price is decreased by 25% and the volume of sales is increased by 30% is Rs 87,500.
Explanation:
First, let's calculate the budgeted cost per unit:
Budgeted cost per unit = Material cost + Labor cost + Variable cost
Budgeted cost per unit = Rs 18 + Rs 9 + Rs 8
Budgeted cost per unit = Rs 35
Next, let's calculate the total budgeted revenue:
Total budgeted revenue = Selling price x Budgeted production and sales
Total budgeted revenue = Rs 50 x 150,000
Total budgeted revenue = Rs 7,500,000
Let's now calculate the budgeted profit before considering the effect of changes in price and volume:
Budgeted profit = Total budgeted revenue - Total budgeted cost - Fixed overhead incurred
Budgeted profit = Rs 7,500,000 - (Rs 35 x 150,000) - Rs 4,00,000
Budgeted profit = Rs 6,250,000 - Rs 5,250,000
Budgeted profit = Rs 1,000,000
Now, let's consider the effect of decreasing the price by 25% and increasing the volume of sales by 30%:
New selling price = Selling price - (25% x Selling price)
New selling price = Rs 50 - (0.25 x Rs 50)
New selling price = Rs 37.50
New volume of sales = Budgeted production and sales + (30% x Budgeted production and sales)
New volume of sales = 150,000 + (0.30 x 150,000)
New volume of sales = 195,000
The new total revenue will be:
New total revenue = New selling price x New volume of sales
New total revenue = Rs 37.50 x 195,000
New total revenue = Rs 7,312,500
The new profit will be:
New profit = New total revenue - Total cost - Fixed overhead incurred
New profit = Rs 7,312,500 - (Rs 35 x 195,000) - Rs 4,00,000
New profit = Rs 7,312,500 - Rs 6,825,000 - Rs 4,00,000
New profit = Rs 87,500
Therefore, the total profit if the price is decreased by 25% and the volume of sales is increased by 30% is Rs 87,500.
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