The management of Sudha Ltd. manufacturing products X and Y have the following independent possibilities:

To produce and sell additional 15,000 units of Y but only if the production of X is reduced by 20,000 units.

To reduce the price of X by Sh.0.25 per unit. This will have the effect of increasing the sale of X by 20%

To produce and sell 55,000 units of X and 102,500 units of Y.

The operating result of the company are given below:

                                           Product X              Product Y

Sales (Units)                      50,000                      100,000

Sales (Sh.)                        250,000                      800,000

Cost of Sales (Sh.)         150,000                       600,000

Gross Profit (Sh.)            100,000                      200,000

Selling Costs (Sh.)          70,000                       140,000

Net Profit (Sh.)                 30,000                       60,000

Direct costs included in total costs amount to Sh.125,000 and Sh.320,000 for products X and Y respectively.

Required:

 Present the figures to management in suitable form giving your recommendations.

Answer rating: 100% (QA)

Product X Sales Units 50000 Sales Sh 250000 Cost of Sales Sh 150000 Gross Profit Sh 100000 Selling C... View the full answer