Question:
The cost structure of an LCD T V, the selling price of which is Rs. 90,000, is as follows:
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Direct materials = 50%
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Direct labour = 20%
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Overheads = 30%
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An increase of 15% in the cost of materials and 25% in the cost of labour is anticipated. These increased costs in relation to the present selling price would cause a 25% decrease in the amount of present profit per T V. You are required to (1) prepare the statement of profit per TV at present and (2) the revised selling price to produce the same percentage of profit to sales as before.