The firm is proposing to buy a new plant which can generate

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Reference no: EM13319435

From the books of Aggarwal Bors, the following information have been extracted:

Rs.

Sales

2,40,000

Variable costs

1,44,000

Fixed costs

26,000

Profit before tax

70,000

Rate of tax

40%

The firm is proposing to buy a new plant which can generate additional annual profit of Rs. 10,000. The fixed costs of new plant is expected to Rs. 4000. The new plant will increase the sales volume by Rs. 40,000. It can be assumed that the ratio between sales and variable costs remains the same. Calculate.

(i) New BEP

(ii) Sales to earn present level of profit

(iii) Sales to earn expected profit on proposed investment

(iv) Maximum profit potential after tax and plant expansion

Reference no: EM13319435

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