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Question - Suman Ltd manufactured and sold 1000 electric irons last year at a price of Rs 800 each. The cost structure of electric iron is as follows:
Particulars Per unit (Rs)
Materials 200
Labour 100
Variable overheads 50
Total marginal cost 350
Factory overheads (fixed) 200
Total Cost 550
Profit 250
Sales 800
Due to heavy competition, price has to be reduced to Rs 750 as suggested by the marketing manager. Is it a good idea?
Assuming no change in costs, calculate the number of electrical irons that would have to be sold at the new price to ensure the same amount of profit as that of the last year.
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