Question

A newly formed company want to increase the sales volume by allowing a discount of

1.9 %

2.11 %

3.13 %

How big increase in sales corresponding the mentioned discounts is required if the target contribution ratio of 33 % is to be maintained?

Answer 1

Let us assume the below data for new company

                        Unit Price   Volume      Amount

Sales                 10             100           1000

Discount Allowed 1.9%

        X be revised sales volume

              Revised Selling rice per unit = 9.81

                    X*9.81=1000

                     X= 101.94, Hence increase % of Sales 1.94 %       

Discount Allowed 2.11%

        X be revised sales volume

              Revised Selling rice per unit = 9.79

                    X*9.79=1000

                     X= 102.15, Hence increase % of Sales 2.15 %

Discount Allowed 3.13%

        X be revised sales volume

              Revised Selling rice per unit = 9.69

                    X*9.69=1000

                     X= 103.23, Hence increase % of Sales 3.23 %