Determines the effect of price reduction, Mechanical Engineering

Determines the effect of price reduction:

In order to enhance the sales, management of Quality ice-cream company decided to give discounts in the sale of one and half liter packages. One of the effects of the policy is the reduction of average sales price from Rs. 50 to Rs. 45. Determines the effect of this price reduction on the volume of ice cream to be sold to obtain break-even.

Analysis

The proposed change in average sales price results in the change of contribution margin per liter from Rs. 12.75 to Rs. 7.75, that means

Contribution margin = Proposed sales price - Variable costs per unit

= 45 - 37.25

= Rs. 7.75

But it does not influence the fixed costs and thus the unit sales volume required for break even would be:

Sales Volume (in liters) = 55,000 / 7.75

                                   = 7097 liters

This new target needed for break even, 7097 liters, is more than 60% higher than the present break even volume of 4314 liters. Therefore the management shall exercise the proposed policy into practice, only if the sales are expected to increase by a volume more than 60% per month, which is very hard.

Posted Date: 1/31/2013 6:03:19 AM | Location : United States







Related Discussions:- Determines the effect of price reduction, Assignment Help, Ask Question on Determines the effect of price reduction, Get Answer, Expert's Help, Determines the effect of price reduction Discussions

Write discussion on Determines the effect of price reduction
Your posts are moderated
Related Questions
Compute minimum value of the horizontal force: Block A of weight 520N rest on horizontal top of block B having weight of 700N as shown in the figure given below. Block A

Question: A 4- pole DC motor is operated as a separately excited motor.  When the motor is externally driven at 1800 rpm with rated field current and zero armature current,

Calculate pressure on each side of spherical ball : Heavy spherical ball of weight W rests in V shaped trough whose sides are inclined at the angles and to the horizontal

Computer Algorithm For On-Line Scheduling For Automated Manufacturing Systems  Introduction Now days  market  is  characterized  via  the  production  of  minute  batch

Laser-induced breakdown spectroscopy (LIBS) is a type of spectroscopy that uses plasma generated by a laser pulse. A schematic of a LIBS system is shown in the figure. The laser is


Q. What is thermoplastic plastics ? These plastic soften under heat, harden on cooling, and can be resoften under heat. Thus, they retain their fusibility, solubility, an

truss is shown in the following figure. Compute the horizontal deflection of joint D produced by both the load and fabrication error (bar AE is 40mm too long). For all bars, area A

Find the diameter of drawn tubing (e = 0.0015 mm) to transport 0.002 m 3 /s of 20 o C water over 400 m length so that the head loss does not exceed 30m by using (

Open cover left crank case and check shifter drum bolt and washer: Check shifter drum bolt torque and washer direction and avail ability.