Question

Salcan Limited produces and sells three products. Details are as under:

A B C
Selling Price 160 280 90
CM Ratio 50% 40% 65%
Ratio (units) 3 2 4

Current profit of the company is Rs 15 million and Fixed cost is Rs 19.9

Million

The company is Considering to introduce deals to boost sales and profit.

The following deals are under consideration.

Deal 1 1 Unit of A and B and 2 units of C

Deal 2 2 units of A and 1 unit each of B and C
Both deals will be offered at a discount of 10% of the normal selling prices

The introduction of deals will increase the sales by 30% and fixed cost by
5%. 40% sales will come from normal operations and remaining from deals.
Deal 1 will be sold twice the amount of deal 2.

Required
Calculate additional profit (if any) brought about from the introduction of
deals and related sales strategy