Gafat Engineering Ethio Plcmanufactures twotypes of TV sets-LCD andCRT-bothhaving only one model. The LCD and CRT television sets sell forBr9,000andBr5,000,respectively.
The company sells its products through its own stores and other outlets.Totalfixed expensesareBr15,000,000per month. Variable expenses and monthly sales data aregiven below:LCDCRTVariable expensesBr5,000Br2,000Monthly sales in units2,0003,000Required:(unless stated figures should be computed forone month)a)Determine breakeventotal volume ofsalesand sales volume for each product.b)Determine sales volume and sales revenue for the company to earn Br500,000 profit after30% profit tax.c)The companyhasplanned to incur Br200,000monthlyselling (promotional)expenses toincrease sales volume for its LCD TV sets to 4,000. If the plan materializesand otherthings remain constant, determinebreakevensales volume and sales revenuefor thecompany.d)The companyhas planned tobuy new and improved technology that reduces variableproductionexpenses for its LCD TV set to Br4,000 while increasing its monthly fixedproductioncosts by Br500,000.
If the plan materializesand other things remain constant,determinebreakevensales volume and sales revenue for the company.e)If the company is guaranteed with total sales volume of10,000 TV setsin a given month,shoulditgo foroption "c"or"d" abovegiven that sales mix remainedconstantasprovided in each of the two options? Why?What if the guaranteed total sales volume of7,000 instead of 10,000? Why?What should be the guaranteed total sales volume for thetwo options to provide equal profit to the company?