A company seeking to improve its competitive position, has launched a cost reduction programme in its existing
Question:
A company seeking to improve its competitive position, has launched a cost reduction programme in its existing plants, apart from trying to increase output.
The present profit before tax comes to 15% of turnover and 30% of capital employed. Other relevant working ratios are:
It has been proposed to reduce the sale price by 10% and increase the output by 20%. No change in fixed costs is expected. The estimated cost reduction amounts to Rs. 42,000.
You are required to work out the relevant figures and ratio based on the proposal and present those along with the existing ones in a meaningful manner and offer your comments.
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Step by Step Answer:
Existing Scenario Total Sales Value Rs 1200000 Variable Costs Rs 780000 Fixed Costs Rs 240000 Capital Employed Rs 684000 Now lets calculate some key r...View the full answer
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