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What should be the guaranteed total sales volume

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Question: Gafat Engineering Ethio Plc manufactures two types of TV sets - LCD and CRT - bothhaving only one model. The LCD and CRT television sets sell for Br 9,000 and Br5,000,respectively. The company sells its products through its own stores and other outlets. Totalfixed expenses are Br15,000,000 per month. Variable expenses and monthly sales data aregiven below:LCDCRTVariable expensesBr5,000Br2,000Monthly sales in units2,0003,000Required:(unless stated figures should be computed for one month)a)Determine breakeven total volume of sales and sales volume for each product.b)Determine sales volume and sales revenue for the company to earn Br500,000 profit after30% profit tax.c)The company has planned to incur Br 200,000 monthly selling (promotional) expenses toincrease sales volume for its LCD TV sets to 4,000.

If the plan materializes and otherthings remain constant, determine breakeven sales volume and sales revenue for thecompany.d)The company has planned to buy new and improved technology that reduces variableproduction expenses for its LCD TV set to Br4,000 while increasing its monthly fixedproduction costs by Br500,000. If the plan materializes and other things remain constant,determine breakeven sales volume and sales revenue for the company.e)If the company is guaranteed with total sales volume of 10,000 TV sets in a given month,should it go for option "c" or "d" above given that sales mix remained constant asprovided in each of the two options? Why? What if the guaranteed total sales volume of7,000 instead of 10,000? Why? What should be the guaranteed total sales volume for the two options to provide equal profit to the company?

Reference no: EM131701269

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