Reference no: EM132765661
Question - Bharat Ltd. is planning its advertising campaign for 2005-06 and has prepared the following budget data base on a zero advertising expenditure:
Normal plant capacity: 2,00,000 units
Sales: 1,50,000 units
Variable manufacturing costs: Rs.15.00 per unit
Selling price: Rs.25.00 per unit
Fixed costs:
Manufacturing: Rs.8,00,000
Selling and administrative: Rs.7,00,000
Required -
a) An advertising agency claims that an aggressive advertising campaign would enable the company to increase its units sales by 20%. What is the maximum amount that Bharat can pay for advertising and obtain an operating profit of Rs.2,00,000?
b) Advertisement is the selling cost, can this cost be classified in controllable category? What are the other managerial decision making basis on which costs can be classified?
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