An enthusiastic marketing manager suggests to his managing director that only if he is permitted to reduce
Question:
An enthusiastic marketing manager suggests to his managing director that only if he is permitted to reduce the selling price of a product by 20%, he would be able to achieve a 30% increase in sales volume. The managing director, finding that the sales volume increase exceeds in percentage the extent of requested reduction in price, gives the clearance.
You are given the following information:
Assuming no changes in the costs pattern in the coming period.
(i). Examine the consequences of the managing directors decision assuming that 30% increase in sales is realised.
(ii). At what volume of sales can the present quantum of profits be sustained, after effecting the price reduction.
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To examine the consequences of the managing directors decision and determine at what volume of sales the present quantum of profits can be sustained a...View the full answer
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