You are required to calculate new and old break-even units and also evaluate whether the proposed…

The Income Statement of a company for the year that ended on 31 March 2010 reveals the following:

Sales @ Rs. 90 per unit

36,00,000

Variable Costs

22,00,000

Fixed Cost

10,50,000

Net Profit

3,50,000

The board of directors are dissatisfied with the result and plans. Implementation of a new marketing programme would increase the Fixed Costs by Rs. 1,92,000 and Variable Costs by Rs. 10 per unit and increase the selling price by 5%. This will increase the sales units by 15%.

You are required to calculate new and old break-even units and also evaluate whether the proposed change is acceptable or not.

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