A manufacturer incurred the following costs in a period for his sole product: TZS 8,000,000 12,000,000...

 

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A manufacturer incurred the following costs in a period for his sole product: TZS 8,000,000 12,000,000 2,000,000 7,000,000 29,000,000 Labour [25% variable] Materials [100% variable] Selling costs [10% variable] Other costs [fixed] Total Costs A normal period's sales are 500 units at TZS 70,000 each, but up to 650 units could be made in a period. Various alternatives are being considered: i. Reduce the price to TZS 63,000 each and sell all that could be made; ii. Increase the price to TZS 80,000 each at which price sales would be 400 units; iii. Keep the present plan. What is the most profitable plan? What are the C/S ratios? What is the break-even point for each alternative? A manufacturer incurred the following costs in a period for his sole product: TZS 8,000,000 12,000,000 2,000,000 7,000,000 29,000,000 Labour [25% variable] Materials [100% variable] Selling costs [10% variable] Other costs [fixed] Total Costs A normal period's sales are 500 units at TZS 70,000 each, but up to 650 units could be made in a period. Various alternatives are being considered: i. Reduce the price to TZS 63,000 each and sell all that could be made; ii. Increase the price to TZS 80,000 each at which price sales would be 400 units; iii. Keep the present plan. What is the most profitable plan? What are the C/S ratios? What is the break-even point for each alternative?

Answer rating: 100% (QA)

To determine the most profitable plan the CS ratio contribution to sales ratio and the breakeven points for each alternative need to be calculated The CS ratio is a measure of how much each sale contr... View the full answer