Question:
Fixation of selling price
A single product company sells its products at Rs. 50 per unit. In 2008, the company operated at a margin of safety of 60%. The fixed costs amounted to Rs. 4,00,000 and the variable cost ratio to sales was 60%. In 2009, it is estimated that the variable cost will go up by 10% and the fixed costs will increase by 5%. You are required to
1. Compute the selling price to be fixed in 2009 to earn the same P/ V ratio as in 2008.
2. Calculate the number of units to be produced and sold to earn the same profit as in 2008, assuming the same selling price of Rs. 50 per unit.