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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Gafat Engineering Ethio Plc manufactures two types of TV sets – LCD and CRT – both
having only one model. The LCD and CRT television sets sell for Br 9,000 and Br5,000,
respectively. The company sells its products through its own stores and other outlets. Total
fixed expenses are Br15,000,000 per month. Variable expenses and monthly sales data are
given below:
|
LCD |
|
CRT |
|
Variable expenses Monthly sales in units |
|
Br5,000 2,000 |
|
Br2,000 3,000 |
|
Required: (unless stated figures should be computed for one month) |
a) Determine breakeven total volume of sales and sales volume for each product.
b) Determine sales volume and sales revenue for the company to earn Br500,000 profit after
30% profit tax.
c) The company has planned to incur Br 200,000 monthly selling (promotional) expenses to
increase sales volume for its LCD TV sets to 4,000. If the plan materializes and other
things remain constant, determine breakeven sales volume and sales revenue for the
company.
d) The company has planned to buy new and improved technology that reduces variable
production expenses for its LCD TV set to Br4,000 while increasing its monthly fixed
production costs by Br500,000. If the plan materializes and other things remain constant,
determine breakeven sales volume and sales revenue for the company.
e) If the company is guaranteed with total sales volume of 10,000 TV sets in a given month,
should it go for option “c” or “d” above given that sales mix remained constant as
provided in each of the two options? Why? What if the guaranteed total sales volume of
7,000 instead of 10,000? Why? What should be the guaranteed total sales volume for the
two options to provide equal profit to the company?
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