Reference no: EM133085429

Question - Super-Power ltd sold 20,000 units of products at Rs 40 per unit. Variable costs are Rs 28 per unit of which Rs 22 per unit are manufacturing costs and Rs 6 per unit are selling costs. Fixed costs are incurred uniformly throughout the year and the amount of manufacturing fixed costs are Rs 56000 and selling fixed costs are Rs 40000. The finance manager wants to know the following:

a) If the demand for their product does not remain the same; how much fall in the demand the company can sustain before it incurs loss.

b) If the company wants to earn a desired profit of Rs 180000; how many units will be required to be sold?

c) Considering the prevailing conditions in the market the variable manufacturing cost are likely to increase by Rs 2 and variable selling costs are likely to increase by Rs 1. Similarly the fixed manufacturing costs and fixed selling costs are also likely to increase by 3% and 2 % respectively. The finance manager would like to know the impact of the same on profits at the current level of sales and selling price.