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In: Accounting

The management Accounting outcome on 31st/12/2017 of BAC limited were as follows:                             &nb

  1. The management Accounting outcome on 31st/12/2017 of BAC limited were as follows:

                                                                     Kshs                           kshs

                Turnover    (sh.50 per unit)                                        4,000,000

                 Less: raw materials            1,600,000

                 Direct Labour                          640,000

                 Variable overhead                  400,000

                 Fixed cost                                 600,000                     3,240,000

                 Net profit                                                                         760,000

  

During 2017, the factory has been working at halfway its production capacity and the strategic manager has estimated that the quantity sold could be doubled in 2018 if the selling price was reduced to Kshs 40/=per unit. All other aspects of costs remained constant except that fixed cost increased by Kshs 100,000/=

Required:

Evaluate the viability of the strategic manager’s proposal of 2018 and justify your answer

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Expert Solution

ekkarill92 answered 1 year ago
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