Compute sales to earn present level of profit

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Reference no: EM1334655

From books of Aggarwal Bors, following information has been extracted:

Rs.

Sales                          2,40,000

Variable costs              1,44,000

Fixed costs                     26,000

Profit before tax              70,000

Rate of tax                         40%

Firm is proposing to buy the new plant that could generate extra annual profit of Rs. 10,000. The fixed cost of new plant is expected to Rs. 4000. New plant would increase sales volume by Rs. 40,000. It could be supposed that ratio between sales and variable costs remain same. Compute.

(i) New BEP

(ii) Sales to earn present level of profit

(iii) Sales to earn expected profit on proposed investment

(iv) Maximum profit potential after tax and plant expansion

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