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Question: A toy manufacturing earns on an average, a net profit of Rs.3 per piece in a selling price of Rs.125 by producing and selling 60000 pieces at 60% of the potential capacity. Composition of his cost of sales is:
During the current year, he intends to produce the same number, but anticipates that:
(a)His fixed charges will go up 1%
(b)Rates of direct labour will increase by 20%
(c)Rates of direct material will increase by 5%
(d)Selling price cannot be increased.
Under these circumstances, he obtains an order for a further 20% of his capacity. What minimum price will you recommend for accepting the order to ensure the manufacturer an overall profit of Rs.1,80,500?
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