The president of a computer corporation is approached by his sales managers who suggests that prices can be lowered on computer sales and profit can be increased.
At present, when sales are 10000 units, variable cost are 40% of total revenue, fixed cost are 50% of the total revenue and profit are 10%.
The product at present is selling at sh. 20000. The sales manager asserts that if the prices are cut by 10%, the total profit will be 11/2 times what they are now. The president is told that the company has plenty of capacity and that there will be no increase in overhead if sales are as great as predicted.
a)What is the variable cost, total cost, total revenue and total profits. (15mks)
b). What price elasticity is necessary if the sales managers prediction is to be realized.

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