From the books of Aggarwal Bors, the following information have 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%
The firm is proposing to buy a new plant which can generate additional annual profit of Rs. 10,000. The fixed costs of new plant is expected to Rs. 4000. The new plant will increase the sales volume by Rs. 40,000. It can be assumed that the ratio between sales and variable costs remains the same. Calculate.
(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